Art Cashin: Weak Economic Reports Don’t Merit More Rate Hikes This Year

Mr Carney, for example, just days after the Bank of England’s Monetary Policy Committee (MPC) came closer to an interest rate rise than it has done during the last nine years, said in a speech on Wednesday that “some removal of monetary stimulus is likely to become necessary” should business investment and other elements driving demand in the economy start to pick up. The pair continues to gain as low Fed rate hike bets keep “Greenback” movement limited.

“From here, we still think we’re a heading, erratically, towards EUR/USD 1.20 and above EUR/JPY 130”, SocGen projects.

The pound was up 0.2 percent at $1.2955 after rising to $1.2977 earlier, its highest since June 9. Consumer spending has also been softer than expected, and if Final GDP falls short of the modest estimate of 1.2%, the dollar could respond with losses. However, yesterday’s report appeared to backtrack on his hawkish rhetoric, instead claiming that Draghi meant to prepare markets for stimulus, rather than making a firm commitment to it.

The euro extended the prior session’s rally against the United States dollar, which had sent it to its strongest one-day percentage gain against the greenback in more than a year. However, the European Central Bank remains optimistic about inflation gradually recovering, leaving Euro traders optimistic about the possibility of QE being lightened by the end of the year.

Italy’s inflation is projected to slow to 1.2% year-on-year in June, with Spain’s projected to drop to 1.5%.

Loans to households grew 2.6 percent last month, the European Central Bank data showed, up from 2.4 percent in April and the fastest rate of growth since March 2009.

The dollar index touched its lowest since October – before Donald Trump was elected U.S. president – as investors shifted to the view that the U.S. Federal Reserve might not be the only game in town when it comes to higher interest rates.

Finally, after years of trying, the economy has shown signs of a modest but broad pick-up this year, leading to calls on European Central Bank chief Mario Draghi to turn off the easy credit tap.

At the same time the speech also underlined the need to be persistent and prudent given, in particular, the real extent of labour market underutilization, suggesting that inflation should gradually pick up but it could take more time than now forecast.

Germany’s 10-year bond yield jumped 9 basis points to 0.45 percent, hitting a six-week high after data for June showed German consumer prices rose by 1.5 percent on the year – higher than analysts had forecast.

All of this bodes poorly for second-quarter profits at big Wall Street banks like JPMorgan Chase & Co (JPM.N), Citigroup Inc (C.N), Bank of America Corp (BAC.N), Goldman Sachs Group Inc (GS.N) and Morgan Stanley (MS.N), whose bond trading businesses have been suffering for years due to a combination of low rates, weak trading activity and new regulations.

There’s plenty of other important data for Euro US Dollar traders to react to on Friday too.