Dollar Holds Decline After Fed Hike Odds Scaled Back on Brainard
A gauge of the dollar held its first decline in four days after Federal Reserve Governor Lael Brainard said the case for the central bank to raise interest rates is “less compelling.”
The market-implied probability of a U.S. rate hike this month dropped to 22 percent from 30 percent at the end of last week. The greenback weakened against most of its 16 major counterparts on Monday following Brainard’s comments in Chicago, which were the last before the Fed enters its quiet period during which officials abstain from publicly speaking about monetary policy in the run-up to their Sept. 20-21 meeting.
“In the wake of Brainard’s speech, and with looming data likely to tilt to the soft side, we expect pricing for Fed tightening to wane further,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney.
The Bloomberg Dollar Spot Index, which tracks the currency against 10 peers, was little changed as of 1:21 p.m. in Tokyo on Tuesday, after dropping 0.3 percent in the previous session. The yen fell 0.1 percent to 101.90 per dollar.
U.S. inflation expectations rebound in August: New York Fed survey
Two measures of U.S. inflation expectations rebounded last month, according to a Federal Reserve Bank of New York survey that may come as a relief to central bankers worried about price measures stuck at low levels.
The New York Fed's monthly survey of consumer expectations found that median year-ahead inflation expectations jumped to 2.8 percent in August, the highest reading this year, from 2.5 percent in July. Three-year expectations rose to 2.7 percent, from 2.5 percent in the previous month.
Both measures rebounded from near record low levels in July. The Fed, looking to raise interest rates soon, wants to see signs of inflation pressures before acting
China August factory output, retail sales beat expectations
China's industrial output grew the fastest in five months in August as demand for products from coal to cars rebounded thanks to higher government spending and a year-long credit and property boom.
China's steel industry, in particular, has perked up in recent months as capacity cuts and production curbs have boosted prices and profits, while a government infrastructure spree and housing boom have spurred demand for building materials from steel to cement.
Improvements in August, while only slight, suggest China's third-quarter economic growth is holding up better than expected just a few months ago and likely remains within the government's 2016 target range of 6.5-7 percent, despite an alarming drop in private investment which is leaving the economy more dependent on government spending.
"In general, today's activity data are in line with the (upbeat) trade data and inflation figures released last week," Commerzbank economist Zhou Hao wrote in a note.
"It is a good time for China to deliver on structural reform, especially on the SOE side, to restore confidence in China's economy," he said, referring to a long-promised overhaul of the country's often bloated and inefficient state-owned enterprises.
Retail sales also handily beat expectations, with growth accelerating to 10.6 percent from 10.2 percent the previous month. Analysts had forecast an increase of 10.3 percent.
Brexit will cost Britain £43.8 billion over the next 3 years
The British Chamber of Commerce (BCC), an influential business trade body, has drastically cut growth forecasts for Britain's economy in the wake of Brexit.
In its first update since the vote to leave the European Union, the BCC on Monday cut its GDP growth forecasts from 2.2%to 1.8% this year, from 2.3% to 1% in 2017, and from 2.4% to 1.8% in 2018.
The revisions mean Britain's economy is set to be £43.8 billion ($58.1 billion) smaller than the BCC had originally forecast by the time 2019 rolls around.
Business Insider has made the point before that Brexit's economic impact is more likely to be on lost growth rather than businesses pulling jobs out of the country.
Oil Declines as U.S. Crude Stockpiles Seen Expanding Oversupply
Oil declined before weekly U.S. government data forecast to show crude stockpiles rose, boosting supplies that are at the highest seasonal level in at least three decades.
Futures dropped as much as 1.6 percent in New York after gaining 0.9 percent Monday. Crude inventories probably increased by 4 million barrels last week, according to a Bloomberg survey before an Energy Information Administration report Wednesday. That would be the biggest gain since the week ended April 8. OPEC flipped its forecasts for rival supplies in 2017, predicting an increase in output from outside the group instead of a decline.
China’s crude oil output dropped to the lowest in more than six years as the country’s state-run energy giants continued to pump less from aging, high-cost fields.
Production during August in the world’s largest energy consumer dropped 9.9 percent from a year ago to 16.45 million tons, according to data from the National Bureau of Statistics on Tuesday. That’s about 3.89 million barrels a day, the lowest since December 2009, according to Bloomberg calculations. Output is down 5.7 percent during the first eight months of the year.
Output from China, which was the world’s fifth-biggest producer last year, has been sliding as state-run companies shut fields too expensive to operate after prices fell earlier this year to the lowest since 2003. The country is forecast to lead production declines across Asia, helping tighten the global market as the world’s largest-consuming region relies more on overseas supplies.
Reference: Bloomberg, Reuters, Business Insider
Thai
Eng