A spate of worse-than-anticipated news for the US has lowered the odds of the Federal Reserve opting to reign in stimulus when the Federal Open Market Committee meets next week.
The US Dollar Exchange Rate was trading in the region of 1.3309 against the Euro as of 15:00 GMT
US industrial production disappointed expectations for a 0.2 per cent gain by stagnating in May following a revised 0.4 per cent decrease in April.
This latest data shows that the series of budget cuts and tax increases wheeled out across the US in March is beginning to take a toll on business investment.
According to chief economist Scott Brown the worse-than-expected result is partly due to ‘the soft-global-growth story’. He continued: ‘You’re seeing strength in things like autos. Everything else seems to be a bit spotty, and some of that is just softer consumer demand in general.’
Manufacturing production advanced by 0.1 per cent in May as predicted.
However, a separate report revealed that US wholesale prices advanced for the first time in three months in May, with the producer price index climbing 0.5 per cent last month following April’s mammoth 0.7 per cent decline. This wildly beat economist’s forecasts for a 0.1 per cent increase.
Core wholesale inflation, a less volatile measure, rose by 0.1 per cent.
After these data releases the US Dollar was trading in the region of 1.3319 against the Euro EUR/USD
Although prices rose more than expected, with price pressure in general so restrained the Federal Reserve may opt to maintain stimulus for longer than some industry experts were beginning to expect.
As economist Stuart Hoffman observes: ‘There’s just a lack of any inflationary pressures across the economy. From the Fed’s point of view, I think that the fact that it’s a bit higher than expected doesn’t in any way change the view that inflation is still quite low, quite tame.’
Similarly, Fed of St Louis President James Bullard recently noted that although ‘labour market conditions have improved since last summer, surprisingly low inflation readings may mean that the Committee can maintain its aggressive programme over a longer time frame.’
A jump in imports has also led to the US current account deficit widening in the first quarter from a revised 102.3 billion shortfall in the fourth quarter of 2012 to 106.1 billion.
Furthermore, the Michigan Confidence Index, which assesses consumer confidence, fell by considerably more than anticipated in June. Although economists had expected the index to hold at its previous level of 84.5 it actually decreased to 82.7.
This index is used to give industry experts an insight into the general health of the economy, and a declining figure is typically indicative of a slowdown.
US Dollar (USD) Current Exchange Rates
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The US Dollar/Pound Sterling Exchange Rate is currently in the region of: 0.6393 >
The US Dollar/Euro Exchange Rate is currently in the region of: 0.7513 >
The US Dollar/Australian Dollar Exchange Rate is currently in the region of: 1.0411 >
The US Dollar/Japanese Yen Exchange Rate is currently in the region of: 95.2000 <
The US Dollar/Canadian Dollar Exchange Rate is currently in the region of: 1.0174 >
The Pound Sterling/ US Dollar Exchange Rate is currently in the region of: 1.5649 <
The Euro/US Dollar Exchange Rate is currently in the region of: 1.3309 <
The Australian Dollar/US Dollar Exchange Rate is currently in the region of: 0.9613 <
The Canadian Dollar/US Dollar Exchange Rate is currently in the region of: 0.9830 <
The New Zealand Dollar/US Dollar Exchange Rate is currently in the region of: 0.8089 <
(Correct as of 15:00 GMT)
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