FOMC Interest Rate Statement - Market Focus for the Week Ahead
Sunday, June 22nd, 2008
The US Dollar ended last week broadly lower against the majors on worse than expected economic data and reduced speculation of a Fed Interest rate hike. In fact the greenback traded lower against the Japanese Yen, Swiss Franc, Euro, GB Pound, Canadian Dollar and the Australian Dollar, as it was unable to hold on to all of the prior week’s strength.
On the data front the USD was not helped by Housing Starts falling to a 17 year low or the fact that the Empire State Business Conditions Index, Building Permits, Philly Fed Index, Industrial Production, Capacity Utilization, Current Account and Initial Jobless Claims all pointed towards economic slowdown.
Interest rate futures are now showing just an 8% chance that the FOMC will increase rates this month. As you would expect the FOMC Interest Rate Statement on Wednesday is the major focus for the week. Particular attention will be paid to the Fed’s views on inflation risk and economic slowdown. Remember that the Fed’s traditional tool for dealing with inflation is a rate hike. However, increased interest rates may put too much pressure on an already weakening economy.
The Federal Reserve Open Market Committee is expected to leave the Federal Funds Rate unchanged at 2.00% this week.
Aside from the interest rate announcement we have high volatility housing data from the US this week. On Wednesday, New Home Sales are expected to contract once more to 515K. This will be followed by Existing Home Sales data on Thursday that is expected to post an increase to 4.96M annualized.
The coming week promises to be fairly quiet from an economic news standpoint with the following high volatility events scheduled:
Monday June 23rd - German Ifo Business Climate Index
Wednesday June 25th - ECB President Trichet Speaks, US Core Durable Goods Orders, New Zealand Current Account
Thursday June 26th - BOE MPC Treasury Committee Hearings, New Zealand GDP & Trade Balance
Visual Analysis & Historical Data
Once again our VA tool will be available for following major news releases. The US housing duo of New Home Sales and Existing Home Sales will both be featured.
