US retail sales beat estimates; FOMC minutes next on the agenda
The minutes of the Federal Reserve’s last meeting are on investor’s radar today and will be looking for details on its plans to reduce its enormous balance sheet and raise interest rates in 2022, as well as its evolving outlook on inflation. At the meeting on January 25-26, policymakers agreed that raising the Fed’s benchmark overnight interest rate from near-zero would be “soon appropriate” and discussed the future of the $9 trillion in securities owned by the central bank.
The Fed’s aggressiveness in tightening monetary policy, and in particular the likelihood of starting a new round of rate hikes in March with a half-percentage-point increase in its target rate, may be revealed in the debate over these themes. Investors presently expect the Fed to go down that route rather than the more cautious quarter-percentage-point rise.
The US dollar index is easing below 96.00 with weak momentum, while dollar/yen is posting some minor losses after two positive days. US futures stocks are suggesting a negative open today, after a strong bullish day on Tuesday.
As omicron infections decline and inflation continues to increase, retail sales in the United States rebounded in January, increasing by 3.8% m/m.
Russia returns some troops to base
Russian forces encircling Ukraine stated they were reducing their numbers on Wednesday; however, NATO demanded proof that they were reducing their numbers, claiming there were indications that more troops were on their way to the region.
The Ukrainian defense ministry has claimed that a cyber-attack has entered its second day. Russia denied any involvement in the incident. Following exercises in the southern and western military districts near Ukraine, Russia’s defense ministry said its forces were withdrawing.
Canadian CPI surprises the market
Canada’s headline inflation rate increased to 5.1% in January from 4.8% in December, greatly exceeding market predictions of 4.8%. It was the highest rate of inflation since September 1991, owing to persistent supply interruptions.
The commodity currencies are showing some positive signs as the kiwi and the aussie are returning to the upside, both testing the short-term moving averages (MAs). Dollar/loonie is heading south, holding near 1.2680.
Oil prices are rising today by 1.4% approaching the latest almost seven-and-a-half-year high of 95.78. On the other hand, gold prices are moving near their opening levels, holding above the long-term symmetrical triangle.
UK CPI jumps to 5.5%
British consumer prices grew at their fastest annual rate in over 30 years, putting pressure on consumers and increasing the likelihood of a third consecutive Bank of England rate hike. As Britain emerged from a protracted period of high wage accords, annual inflation climbed to 5.5% in January, the most since March 1992. The Bank of England estimated earlier this month that inflation will peak around 7.25 percent in April, when energy expenses will more than double. Sterling is showing some positive vibes but is still developing around $1.3555, remaining in a neutral range in the short-term.
