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US: After strong existing home sales, market focus on PMI data – Rabobank

FXStreet (Delhi) – Bas van Geffen, Quantitative Analyst at Rabobank, note that the US existing home sales beat expectations, and initial jobless claims declined a bit more than expected.

Key Quotes

“But at the same time, the Chicago Fed National Activity Index showed some weakness. This index, which is a good leading indicator for US inflation, suggests that it could take somewhat longer for US inflation to return to the Federal Reserve’s target rate.”

“In this context, the impact of Draghi’s commentary must also be considered: the resulting stronger dollar will not be met with too warm a welcome in the US. If more signs of slower inflation dynamics develop, this could have some impact on the balance of FOMC members calling for a rate hike before the end of the year. This will of course depend on the balance that the FOMC wants to strike in assessing the two parts of its mandate: employment on one hand, and inflation on the other.”

“The US PMI is also expected to fall slightly (52.7 from 53.1). Unfortunately, the preliminary estimate is only a headline figure, though. We will have to wait for the final PMI to get insight in the underlying components, with, of course, specific interest in the labour market sub-component.”

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