Dollar Weakens As Fomc Begins, Stocks Quiet
Today marks the start of another FOMC meeting and heading into it, market expectations for a summer interest rate rise have waned considerably since the last time the Fed met.
By Peter Martin
Tuesday, April 28, 2015 - 00:00
That is because economic data has been surprisingly weak recently, failing to bounce-back as the winter weather has receded, and this adjustment in expectations has contributed to a decline in the dollar. Edginess over the Fed meeting has been evident early today in the FX market today, with a broad decline for the dollar: AUD/USD jumped 1.36% to 0.7964, EUR/USD rose 0.29% to 1.0923, while GBP/USD climbed 0.27% to 1.5278.
The strengthening of the pound against the dollar came despite the release of data showing a surprisingly sharp slowdown in the UK economy during the first quarter. The pace of UK GDP growth fell to 0.3% from 0.6% in the final quarter of last year, failing to meet the consensus estimate which had pointed to 0.5%. The annual pace of growth dropped to 2.4% from the fourth quarter’s 3.0%, and is now at its lowest since the end of 2013. This is only a preliminary report, of course, and the numbers could well be bumped higher in the next revision, but based on things as they stand, the situation is looking a little bleaker than the Bank of England’s recent growth forecasts and the chances of a UK rate hike look slim in the coming months.
US house price data released pre-market this morning came in stronger than expected. Case-Shiller’s 20-city Home Price Index rose a seasonally-adjusted 0.9% in February, maintaining the strong pace of gains seen in the month prior and exceeding the consensus estimate which had called for 0.7%. Year-on-year the change is now 5.0%, up from 4.5% seen in January, and continues a healthy trend of price rises, which have come despite signs of decline in other metrics for the housing sector. A report earlier this month showed housing starts stuck beneath the 1 million-unit annualized pace in March, with little signs of improvement despite more clement weather conditions.
Stocks opened little changed on Tuesday, though Apple ($AAPL) pushed to an all-time high following its bumper results. Shortly after the open, the Dow Jones was up 21 points or 0.12% at 18,059, while the S&P 500 Index was flat at 2108.9. Apple reported better-than-expected earnings and revenue after the market close last night and also announced an expansion in its capital return program from $130 billion to $200 billion.
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