US data is on a winning streak – the Fed

US figures were quite lousy for quite some time, but things are a-changin.

Here are few things to note.

Consumption remained illusive: the fall in the price at the pump was supposed to leave more money in Americans’ pockets but they didn’t spend it. Report after report, the headlines talked about a disappointing retail sales read. The last one for January was already a beat on all fronts.

Housing also seemed to slow down with expectations of a rate hike, but existing home sales rebounded, and also prices remain upbeat.

Jobless claims, which began a worrying move to the upside, hinted the end of the rise in hiring. Long weeks at 280K probably resulted in that not-so-spectacular jobs report. However, in the past two weeks, we are back to the record low area of the 260Ks, with the last report standing on 262K.

And the latest comes from inflation: The Fed expressed extra worries about inflation, and here we go: core inflation is above the Fed’s 2% target and it is drifting away to the upside: 2.2% against 2.1% expected. Where are the misses we got so used to? Will the Core PCE Price Index, the Fed’s fave on inflation follow suit? There’s a good reason to believe so.

Also headline inflation, which was around 0% due to the fall in oil prices, is beginning to see the base effect fade away. The base effect is the big fall seen in early 2015, following that OPEC meeting of November 2014. Yes, prices of oil continue digging the bottom of the barrel, but the largest falls may already be behind us. Also here, headline CPI for January is 1.4% against 1.3% expected.

While we cannot expect a rate hike in March with all those worried Fed doves, the hawks and Yellen can pat their backs saying that December rate hike was not a mistake. At least for now, the weak Q4 seems like a glitch, that will be corrected in Q1 2016.

More: EUR/USD: Trading The FX Risk Rally – Morgan Stanley

Get the 5 most predictable currency pairs

Leave a Reply

Your email address will not be published. Required fields are marked *