U.S. Data Kicks off Downtrend

U.S. data on Monday showed uneven growth in the U.S. Contracts to purchase pre-owned homes, indicating that a bounce-back in the housing sector will not come as quickly as hoped. Other reports released on Monday indicated that growth in services activity slowed, while the Dallas Fed’s report showed that regional manufacturing slumped this month as well. Investors are still waiting for a report from the Federal Reserve on Wednesday about its stimulus program, though analysts expect that the Fed will likely reconfirm its willingness to wait longer before raising interest rates. U.S. unemployment has fallen to 5.9 percent and economic growth has remained steady in the second half of 2014, painting a strong picture that positions the Fed to tighten policy. Still, with the dollar strengthening and Japan and Europe flirting near levels of recession, analysts remain concerned that the U.S. inflation will not continue towards the Fed’s 2 percent goal. The U.S. Central Bank is expected to announce the end of its large-scale bond-buying stimulus on Wednesday.

The Ripple Effect?

Following Monday’s U.S. reports Asian stocks fell on Tuesday, with the MSCI Asia Pacific Index slipping 0.1 percent to 138.22 just after 9am in Tokyo. But news out of Asia isn’t all bad – Japanese retail sales growth showed improvement for the third straight month in September, marking the biggest gain since March. Consumer spending has decreased since the country’s tax hike in April, and another tax increase is expected to boost revenue for welfare spending, a decision that may be taken more quickly once signs of a turnaround are felt comfortably. The Japanese government is also trying to bring inflation rates to 2 percent sometime in 2015 in an effort to stem the risk of returning to deflation.

Sara Patterson
Sara Patterson has a Master’s Degree in political science and enjoys analyzing both current events and the international markets to get a fuller perspective of the currency market. Before turning to financial writing, she taught English writing skills to high-school age students. Sara’s work has been published on various financial and Forex blogs.