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Market Overview
WEEKLY REVIEW: To raise or not to raise – the question to be answered by the Fed
The Federal Reserve will release its interest rate decision next week. Market participants were cautious this week as the U.S. economic data was not able to clarify if the Fed starts raising its interest rate in September or not. The U.S. labour market continued to strengthen. The number of initial jobless claims in the week ending September 05 in the U.S. declined by 6,000 to 275,000 from 281,000 in the previous week, in line with expectations.
But the inflation in the U.S. remains weak. The U.S. producer price index was flat in August, beating expectations for a 0.1% decline, after a 0.2% rise in July.
On a yearly basis, the producer price index decreased 0.8% in August, beating forecasts of a 0.9% decline, after a 0.8% fall in July.
A stronger U.S. dollar and low oil prices still weigh on inflation.
The producer price index excluding food and energy climbed 0.3% in August, exceeding expectations for a 0.1% gain, after a 0.3% increase in July.
On a yearly basis, the producer price index excluding food and energy climbed 0.9% in August, beating forecasts of a 0.7% increase, after a 0.6% rise in July.
The consumer sentiment in the U.S. seems to weaken this month. The Thomson Reuters/University of Michigan preliminary consumer sentiment index slid to 85.7 in September from a final reading of 91.9 in August, missing expectations for a decrease to 91.2. It was the lowest level since September 2014.
China will release its economic data on Sunday. The weak data from China could force the Fed to delay its interest rate hike.
Greece should turn again in focus as the snap election is approaching. The election will be held on September 20. It will need time to form a government. The implementation of the bailout obligations is likely to suffer.
It is likely that the currency pair EURUSD will test the level at $1.1400, maybe even the level of $1.1500, if the Fed will not raise its interest rates.
If the Fed raises its interest rate, the currency pair EURUSD may test the level of $1.1100 or $1.1000.
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