US data woes ahead of inflation guide

I’m not going complain about any volatility seen in FX these days but I’m surprised at the dollar move yesterday. Yes durable goods missed the forecast by 0.9% but  isn’t this number really just airplane sales? I imagine this would be a rather volatile product on a month-on-month basis. Okay so the US GDP Q1 reading at -2.9% did resemble the England and Australian football (soccer) teams’ World Cup fortunes but we have been hearing for months from Fed members to dismiss the backward looking data due to the severe weather impact seen across the pond last winter. The PCE reading from the US is released this afternoon and I believe this data is far more directional for the dollar’s fortunes as we know this is the Federal Reserve’s preferred inflation measure guide. We need to remember that inflation is part of the Fed’s dual mandate. With Janet Yellen dismissing the recent uptick in inflation as ‘noise’ I think a higher reading today is going to be hard for the market and the Fed to ignore.

The proud pound will be in focus this morning following political comments on Mark Carney’s forward guidance policy that has been described by one MP as ‘one day hot, one day cold.’ The focus today for sterling will turn to the financial stability report (FSR). Whilst the FPC can only issue recommendations at the moment, legislation has already been proposed in the UK that would make the FPC’s guidelines legally enforceable. Based on this week’s BoE Credit Conditions survey, banks seem to be expecting recommendations to be based on loan-to-income ratios, rather than loan-to-value ratios, therefore not contradicting the government’s ‘help-to-buy’ scheme, which helps buyers with small deposits to get onto the property ladder.

EUR/USD

Supports 1.3580-1.3550-1.3505 | Resistance 1.3615 1.3640 13670

USD/JPY

Supports 101.65-101.40-100.75 | Resistance 102.15-102.50-102.85

GBP/USD

Supports 1.6950-1.6925-1.6890 | Resistance 1.7055-1.7100-1.7140