US Open – Inflation, Income, Spending, Jobs Eyed

US futures are pointing slightly to the downside again on Thursday ahead of the release of some key inflation, spending, income and labour market data.

I think investors are a little downbeat today following Wednesday’s FOMC statement which may have been more hawkish than some were expecting. While policy makers did acknowledge the slowdown in the economy, the statement stressed that this period of lower growth is believed to be transitory and they see inflation returning to 2% in the medium term.

That would suggest they have not been deterred from raising rates this year as some may have hoped. The first quarter was certainly one to forget for the US but there were so many temporary factors driving that slowdown and companies will adjust to the stronger dollar in time. I think it would have been a big mistake for the Fed to push back plans for a hike based on that quarter alone.

It just comes to show what kind of environment we’re in when unemployment is at 5.5%, job creation has been strong for a long time barring the occasional blip as seen in March, CPI core inflation is at 1.8% and wage growth is good, yet people are still calling for extraordinarily low levels of interest rates. Regardless, I think this still makes a September rate hike likely while June seems off the cards now.

The eurozone managed to escape deflation in April following a four month stretch of falling prices. The ECBs quantitative easing program appears to have been largely responsible for upward price pressure returning, along with the bounce in oil prices. With indicators now pointing to moderate improvements in the eurozone economy going forward, the threat of long term deflation appears to have been reduced. We’ll probably continue to see low levels of inflation due to low oil prices and large amounts of slack in the economy but this is still progress.

The S&P is expected to open 6 points lower, the Dow 60 points lower and the Nasdaq 21 points lower.

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Craig Erlam
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the BBC and The Telegraph, and he also appears regularly as a guest commentator on Bloomberg TV, CNBC, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.