Daily Market Update

Tight Ranges as CPI Shows Economy is Not Hot

September 14, 2021

The U.S. Dollar is trading in slightly less favorable ranges this morning as we keep on watching the agenda in Washington. 

Overview

President Joe Biden’s plans for hiking taxes on the rich are getting serious publicity stunts but dividing the Democratic party as some in its ranks are avoiding the topic, thus damaging the “Inequality Pledge” members had made that would make passing such a tax bill possible. Additionally, there are key members hesitating on supporting the large spending planned.

Meanwhile, markets around the globe are still nervous about a Chinese government that wants to embark on re-adjusting the economy in the name of helping gig workers and controlling the web, which has expanded in its use far more than regulators expected during the past two years.

Earlier, the release of Consumer Price Index figures revealed a very low pace of price increases for August as it could not maintain the expected 0.3% from July and only expanded 0.1%. The yearly average remained at 5.3%. Furthermore, Real Average Earnings fell as they contracted by (-0.9%). Underwhelming data is playing right into the hands of combative politics as the pandemic frustrates everyone from the political class to teachers in crowded classrooms.

 

What to Watch Today…

  • No major economic events scheduled for today

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EUR 

The Euro came back, quickly overnight, as the mood seemed to change a bit following commentary from European Central Bank members. In addressing inflation, one member said that they feel confident the ECB can act once inflation exceeds 2.0%. More importantly, there was a very positive tone about improvement in EU fortunes even as Delta slowed down the global momentum.

We could feel safe being a little bullish on the shared currency, but we must recall that markets already have priced-in there is will to cut emergency purchases so gains could be limited.

 

GBP  

The Pound is not moving a ton, but there is a chance for weakening if markets see the labor situation in the U.K. as fragile. A 3-month jobs gauge showed fewer jobs added than expected, 183K under the 199K estimate, however, unemployment went down, and wages kept increasing by 8.3% annual average. The Bank of England is expected to meet on September 23rd and likely speak of tapering and raising interest rates in 2022. Any change in language could certainly affect Sterling.

 

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