The Greenback shrugged off better than expected data and Yellen’s remarks as traders were disappointed about the delay in the healthcare bill vote.
- U.S. CB consumer confidence index rose from 117.6 to 118.9 vs. 116.1 forecast
- Richmond manufacturing index up from 1 to 7 vs. forecast at 4
- Fed head Yellen: Inflation still running below our long-run objectives
- FOMC policymaker Harker: Dip in inflation is temporary, hike still needed
- IMF slashed U.S. growth forecast for this year and the next
Testimonies from FOMC members
Fed head honcho Janet Yellen and FOMC member Patrick Harker gave their views on the U.S. economy and monetary policy during their testimonies, but their statements failed to surprise market watchers.
As already mentioned in the June Fed statement, Yellen reiterated that inflation remains below their long-run objectives even while jobs growth is on the rise and is putting upside pressure on wages. On a more upbeat note, she did assure that there is a very low chance of seeing another financial crisis “in our lifetime.”
Meanwhile, Philadelphia Fed President Harker was a lot more optimistic in saying that the drop in inflation is likely to be temporary. He added that he would back another interest rate hike before the end of the year, consistent with the Fed’s time line. Harker also projected that headline inflation would reach 2% by 2018.
Upbeat U.S. economic reports
Medium-tier figures from Uncle Sam underscored the relatively upbeat assessment of the U.S. economy and signaled further upside.
In particular, the CB consumer confidence index surged from 117.6 to 118.9 to reflect stronger optimism instead of dipping to the projected 116.1 figure. This could mean a rebound in consumer spending down the line as folks tend to go on shopping sprees when they feel confident about the economy and financial prospects.
The Richmond manufacturing index also surprised to the upside with a climb from 1 to 7 to reflect a faster pace of industry growth, outpacing the consensus at 4. Components revealed that the gain was mostly due to a rise in shipments and new orders, reflecting stronger business activity.
IMF downgraded U.S. growth forecasts
Folks over at the IMF don’t seem to be counting on Trump’s tax reform to boost growth anytime soon, as their number-crunchers dealt downgrades to their U.S. GDP forecasts for 2017 and 2018. They even mentioned that the Donald’s 3% GDP goal is unlikely.The institution projects that the economy will grow by 2.1% in this year and the next, down from their earlier estimates of 2.3% and 2.5% respectively. But since the Trump administration has yet to show some progress in tax reform, the IMF removed these assumptions from their calculations.
To add salt to these wounds, lawmakers announced that they would be delaying the vote on the healthcare bill as Republican senators worried that they don’t have enough votes (Sounds familiar? Well, it’s happened in the House before!).
As it turns out, even some GOP members aren’t huge fans of the bill either, so it looks like there could be a lot of political back and forth from here. According to Republican Senator Mitch McConnell of Kentucky:
“We will not be on the bill this week, but we will still be working to get at least 50 people in a comfortable place.”
Wall Street is not pleased about these developments (or lack thereof) as indices closed lower for the day:
- S&P 500 is down to 2,417.75 (-0.75%)
- Dow 30 index closed at 21,310.66 (-0.46%)
- Nasdaq is lower by 104.50 points (-1.81%)
Major Market Mover(s):
The franc carried on with its climb for the most part of the day, taking in some risk-off flows out of the dollar’s hands.
NZD/CHF is down from .7086 to a low of .6977 (-1.47%), AUD/CHF tumbled from .7375 to .7276 (-1.26%), USD/CHF is testing support at the .9600 handle (-1.22%).
Watch Out For:
- 10:30 pm GMT: FOMC policymaker Kashkari’s testimony