The US dollar rose Tuesday on the combination of stronger retail sales and Fed hints that cuts might not be so deep. The pound lagged and cable fell to the lowest since April 2017 on Brexit fears. CPIs for UK, Eurozone and Canada all came in within expectations, but GBP continues to focus on No-deal related remarks 6 days ahead of the revelation of the new PM. US building permits and housing starts fell by more than expected. 2 new trades were issued on Tuesday for Premium members, supported by 5 technical charts.
Former St. Louis Fed President Bill Poole once argued that markets focus too much on the upcoming Fed meeting and not enough on themes and policies that will persist. At this point, a July 31 cut is inevitable. Retail sales were strong with the control group up 0.7% compared to the +0.3% consensus but minutes after the release, Powell brushed it off. He called the consumer and domestic economy solid but once again pointed to uncertainty on trade, business investment and inflation.
It's increasingly clear that the Fed thinks it has gone beyond neutral and needs to take back some rate cuts to boost inflation. Evans and Kaplan added more color Tuesday with Kaplan's comments giving a boost to the dollar by framing a cut as 'tactical' and not the start of a cycle. Evans continued to flirt with the idea of a 50 bps cut but was clear that he only sees 50 bps in total easing this year and whether it was all at once or in two parts was a matter of strategy.
After Theresa May
Now that PM Theresa May has announced stepping down from the Conservative Party leadership as of June 7, the ongoing political chaos will shift temporarily from striking a deal on the Withdrawal...