Market news

28 September 2015

American focus: the euro rose

European currencies strengthened against the US dollar on a background of mixed US data and speeches of a number of Fed officials. The US Commerce Department reported that the volume of household spending rose again in August, topping with the assessment of experts. Last Change suggests that consumers continue to support the economy, despite the turbulence in financial markets and slowing growth abroad.

According to the data, personal spending increased in August by 0.4% compared with the previous month. Recall that in June, July and expenses increased by 0.4% and 0.3%, respectively. Meanwhile, the amount of personal income rose by 0.3% in August. Economists had forecast a 0.3 percent rise in spending and 0.4 percent increase in revenue.

Consumers are the backbone of the US economy. Personal expenses are more than two-thirds of gross domestic product. Recall during the winter slowed down the growth of household spending, but in spring the situation has changed for the better, which helped secure the expansion of GDP of 3.9% in the second quarter. Economists believe that in the current quarter, economic growth will slow to around 2%.

The report also showed that the price index for personal consumption expenditures - the preferred inflation gauge of the central bank - has remained unchanged from July and rose by only 0.3% per annum. The basic price index, which excludes food and energy, rose by 0.1% in monthly terms and 1.3% per annum.

The Ministry of Commerce said that in August, consumers increased spending on durable goods. In addition, it was reported that the personal savings rate fell to 4.6% in August from 4.7% in July.

In addition, the National Association of Realtors (NAR) reported that in August, the number of pending home sales declined significantly in August, despite forecasts for a moderate increase.

According to data seasonally adjusted index of pending home sales - the gauge of expected sales - fell in August by 1.4 percent to 109.4 points. Economists had expected the index to rise 0.5 percent after a similar change in June. In annual terms, it had risen to 6.1 percent, recording the 12th consecutive monthly increase, fueled by steady job growth and low mortgage rates.

It should be emphasized, other recent data pointed to strong demand in the housing market this summer. Sales of new single-family home, which accounted for about 10% of the market, rose by 5.7% last month. Meanwhile, the pace of home sales in the secondary market have returned to their pre-crisis levels. However, despite the significant increase in sales, the establishment of new single-family homes increased by only 8.7% in August. Meanwhile, builders sentiment index rose to a high of nearly 10 years.

The momentum of the US economy is growing, but the US Federal Reserve should continue to closely monitor the risks. On Monday the Fed spokesman Daniel Tarullo.

Discussing financial regulation at a conference in Paris, Tarullo warned that the regulation should not be limited to certain standards, as the global financial crisis of 2008 are still being felt. There were too many lost jobs, and economic growth slowed down considerably.

"In the US there is a fairly strong growth momentum at the moment, although we continue to monitor the risks to which it is linked," - said Tarullo.

There are signs, the austerity measures taken by European countries, have been effective, but many other countries are in need of stimulation of aggregate demand to support the loans, he added.

President of the Federal Reserve Bank of New York, William Dudley said Monday that the central bank will be able to start tightening monetary policy until the end of 2015.

"I expect that we will probably raise rates later this year", and it is possible at any meeting of the Fed before the end of the year, he said. The Fed, however, will be dictated by the dynamics of the US economy and financial conditions and events abroad.

The yen rose significantly against the dollar, reaching Y120.00. On the dynamics of trade have affected the statements of the Bank of Japan Kuroda, who reiterated that the Central Bank will continue to implement accommodative policy until you reach the inflation target of 2%. "We will not hesitate to correct the policy, if it is required to achieve a target price level of the Central Bank", - said Kuroda, adding that in order to achieve the objective of 2% is necessary to further enhance the positive economic cycle in the country. According to the head of the Central Bank, consumer price inflation may reach 2% in the 1st half of fiscal 2016. Kuroda also said that time is needed to overcome the deflationary mindset of companies and households. "Japan's macroeconomic fundamentals remain strong, the economy will continue a moderate recovery. For a while exports may remain in the flat, but then resume a gradual increase in tandem with developing economies", - added the head of the Central Bank.

Market Focus
  • Fed's Powell signals resumption of balance sheet growth
  • European Commission spokesman: EU position has not changed, we want a deal with UK
  • Canada’s building permits unexpectedly surge in August
  • Producer prices in the U.S. unexpectedly decreased in September

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