Two speculations were in focus this week: speculation that the Fed will start raising its interest rate in December and speculation that the European Central Bank (ECB) will add further stimulus measures next month.
Today's U.S. economic data showed that the U.S. economic recovery remains uneven. This week's U.S. economic data was weaker than expected. Retails sales rose slightly in October, while producer prices continued to decline.
The Fed's monetary policy meeting was in focus this week. The central bank noted that that an interest rate hike in December is still on the table.
The euro came under pressure this week on comments by the European Central Bank's (ECB) President Mario Draghi. He said at a press conference on Thursday that the value of the ECB's asset-buying programme will be discussed at the monetary policy meeting in December. He pointed out that the central bank will expand its asset-buying programme if needed to boost inflation toward the 2% target.
The U.S. economic data showed this week that it is unlikely that the Fed will start raising its interest rates this year. Inflationary pressures remain at very low level. Only U.S. consumer price index excluding food and energy rose to 1.9% in September from 1.8% in August. It is unclear if this inflation data will be enough for the Fed's interest rate hike. Fed Governors Lael Brainard and Daniel Tarullo said this week that they would like to see clear signals that the inflation was accelerating toward the 2% target.
The uncertainty about the interest rate hike by the Fed this year remained. Yesterday's minutes of the latest Fed's meeting did not produce any clarity on the Fed's monetary policy. The Fed said that it wanted to have more time to see if the slowdown in the global economy will have a negative effect on the U.S. economy. FOMC members noted that the U.S. labour market continued to improve, while the inflation remained at low levels.
Today's U.S. labour market data makes it clear that the interest rate hike by the Fed this year is unlikely. According to the U.S. Labor Department, the U.S. economy added 142,000 jobs in September, missing expectations for a rise of 203,000 jobs, after a gain of 136,000 jobs in August. August's figure was revised down from a rise of 173,000 jobs. The U.S. unemployment rate remained unchanged at 5.1% in September, in line with expectations. Average hourly earnings were flat in September, missing forecasts of a 0.2% gain, after a 0.4% increase in August.
The Fed kept its monetary policy unchanged last week, saying that the slowdown in the global economy and low inflation expectations were main reasons for this decision. The whole statement was dovish. But the Fed Chairwoman Janet Yellen said in a speech at the University of Massachusetts on Thursday that she expects that the Fed will start raising its interest rates by the end of the year, followed by a gradual pace of interest rate hikes.
The Fed released its interest rate decision yesterday. The Fed kept its monetary policy unchanged, saying that the slowdown in the global economy and low inflation expectations were main reasons for this decision.
FOMC members voted 9-1 to keep interest rates unchanged. Only Richmond Fed President Jeffrey Lacker voted to raise interest rate by 0.25%.
GDP for 2016 and 2017 were downgraded.
The Federal Reserve will release its interest rate decision next week. Market participants were cautious this week as the U.S. economic data was not able to clarify if the Fed starts raising its interest rate in September or not. The U.S. labour market continued to strengthen. The number of initial jobless claims in the week ending September 05 in the U.S. declined by 6,000 to 275,000 from 281,000 in the previous week, in line with expectations.
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