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January 2017 US PPI final demand 0.6% vs 0.3% exp m/m

Details of the January 2017 US PPI final demand data report 14 February 2017

  • Prior 0.2%


Fed’s Yellen: Further Rate Increases Likely To Be Appropriate

In her prepared statement to the Senate Banking Committee, Federal Reserve Chair Yellen stated that further adjustments in interest rates are likely to be needed, although policy is not on a pre-set course.

She went on to say that a rate increase will be likely be appropriate at one of the forthcoming meetings if the economy remains on track. At the upcoming meetings, the FOMC will evaluate whether employment and inflation are continuing to evolve in line with their expectations.

Waiting too long before raising rates would be unwise as it could require disruptive rate increases that push the economy into recession.

According to Yellen, the incoming data suggests that the labour market continues to strengthen and that inflation is moving towards 2%, in line with FOMC expectations. In this context, the FOMC expects the economy to expand at a moderate pace with the job market set to strengthen somewhat further.

The case for higher interest rates was also based on expectations that the natural Fed Funds rate will gradually increase over time.

She still expected US and global monetary policy to remain accommodative and that the economic outlook is uncertain.
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US MBA mortgage applications -3.7% vs 2.3% prior

US MBA mortgage market index report week ending 10 February 2017

  • Mortgage market index 379.8 vs 393.6 prior
  • Purchase index 223.9 vs 233.7 prior
  • Refi index 1239.6 vs 1276.4 prior
  • 30yr mortgage rate 4.32% vs 4.35% prior


US initial jobless claims 239K vs 245K est.

4- week MA 245.250K vs 244.75K prior


US January Leading Indicators Rise 0.6%

The Conference Board Leading Economic Index (LEI) increased 0.6% for January following a 0.5% gain for December and the January gain was above consensus expectations of a 0.5% increase.

This was the fifth successive increase in leading indicators and the last two releases have shown significant acceleration and there has been an increase of 1.6% over the past six months.

The coincident indicator rose 0.1% for January following a 0.3% increase in December with a 0.8% gain over the past six months.

According to Ataman Ozyildirim, Director of Business Cycles and Growth Research, ‘the January gain was broad based among the leading indicators and, if this trend continues, the US economy may even accelerate in the near term’.

The strength in equity markets during the past few weeks will provide further near-term support to leading indicators while jobless claims, another component of the index, have remained very low with figures below 250,000 for the past 3 weeks. There were also notably strong February readings for the New York Empire manufacturing index and Philadelphia Fed manufacturing index.
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US Dollar Rise on Fed Rate Hike Bets at the Mercy of Team Trump

Fundamental Forecast for the US Dollar: Neutral
  • Fed-derived support for the US Dollar fizzled before G20 meeting
  • USD rebounded on international praise for Sec’y of State Tillerson
  • Fed may boost greenback anew absent more “team Trump” jitters

Is the US Dollar trending as DailyFX analysts expected so far in 2017? Find out here!

The US Dollar was seemingly of two minds last week. Prices initially rallied to a one-month high as Fed Chair Janet Yellen struck a hawkish tone in Congressional testimony. The central bank chief warned against waiting too long to raise rates, sending the greenbackupward alongside Treasury bond yields and steepening the 2017 tightening path implied in Fed Funds futures.

The mood changed abruptly after the week’s stock of policy-shaping news was exhausted. Prices peaked after strong CPI data crossed then the wires and promptly retreated. Investors’ change of heart may have reflected profit-taking on short term long-USD bets ahead of a G20 foreign ministers’ meeting in Bonn, Germany. The outing marked the first such multilateral sit-down for newly installed Secretary of State Tillerson and traders were seemingly worried that he might channel his combative boss, Donald Trump.

As it turned out, the summit passed without incident. Encouraging comments from German Foreign Minister Sigmar Gabriel and his French counterpart Jean-Marc Ayrault in its aftermath seemed to put traders at ease and the US unit launched a spirited recovery (as expected). Tellingly, the benchmark US 10-year Treasury bond and the Japanese Yen – both standby anti-risk assets that tend to rise when sentiment sours – topped and began to drift lower precisely as USD hit its intraday floor and rose alongside the S&P 500.

This seems to offer a blueprint for what may be on offer in the week ahead. Scheduled comments from Fed officials are sprinkled throughout the week and minutes from this month’s FOMC sit-down are due to cross the wires. Recent rhetoric suggests policymakers are determined to put on a brave face and proceed with stimulus withdrawal even as the fiscal outlook remains clouded, with some even talking about scaling down the central bank’s massive balance sheet.

At face value, this seems to bode well for the US Dollar. However, the markets’ jittery disposition to all things coming from Washington DC since the Trump administration assumed power ought to be kept in mind. Any remarks from new Treasury Secretary Mnuchin may be especially market-moving. The White House has tried to talk down the currency, accused several countries of gaming exchange rates for unfair trade advantages and clashed with the ECB about bank regulation. Traders are keen to see if Mr Mnuchin will follow suit.

The US unit may build on Friday’s gains if the Fed ends up dominating the spotlight, stoking March rate hike possibilities. Dangling the prospect of a two-pronged tightening effort – raising front-end borrowing costs and reducing the weight of the balance sheet on the long end of the yield curve – may go a long way indeed. Unsettling news-flow from team Trump may shatter this rosy vision however.


January 2017 US Philly Fed non-manufacturing business activity 29.3 vs 37.7 prior

The unadvertised Philly Fed services index for February 2017

  • Firm level activity 38.0 vs 33.3 prior
  • New orders 25.3 v s28.9 prior
  • Employment 12.4 vs 19.5 prior
  • Wage and benefit costs 26.7 vs 40.8 prior


Markit US February prelim services PMI 53.9 vs 55.8 expected

  • Prior was 55.6
  • New business index at lowest since Sept at 53.3 vs 56.0 prior
  • New orders 54.3 vs 55.8 prior
  • Employment 52.7 vs 53.9 prior
  • Composite PMI 54.3 vs 55.8 prior


January existing home sales 5.69m vs 5.55m expected

Existing home sales from the National Association of Realtors

  • Prior was 5.49m (revised to 5.51m)
  • Estimates ranged from 5.38m to 5.65m
  • Sales up 3.3% m/m
  • Inventories at 3.6 months (unchanged from prior)
  • 7% of sales were distressed (unchanged from prior)


Initial jobless claims 244K vs 240K expected

Weekly US initial jobless claims data

  • Prior was 239K (Revised to 238K)
  • Continuing claims 2060K vs 2068K expected

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