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EUR/USD Flat After Disappointing US Data, FOMC Rate Cut

October 31, 2019 (Last updated on November 1, 2019) by

EUR/USD was flat today after the majority of macroeconomic reports released in the United States missed expectations. Yesterday, the Federal Open Market Committee cut interest rates.

Personal income and spending rose in September. Personal income rose 0.3% after increasing by 0.5% in August (revised up from 0.4%). Personal spending rose by 0.2% after increasing at the same rate in the previous month (revised up from 0.1%). Analysts had predicted an increase of 0.3% for both indicators. Core PCE inflation was at 0.0%, whereas market participants were expecting the same 0.1% rate as in the previous month.

Initial jobless claims were at a seasonally adjusted level of 218k last week, up from 212k the week before. The median forecast was at 215k.

Chicago PMI fell from 47.1 in September to 43.2 in October. That instead of rising to 48.4 as analysts had predicted.

Yesterday, several reports were released:

ADP employment rose by 125k in October, matching forecasts exactly. The September increase got a significant negative revision from 135k to 93k.

US GDP rose by 1.9% in Q3 2019, beating the average forecast of 1.6%, according to the advance estimate. The indicator rose by 2.0% in Q2.

Crude oil inventories climbed by 5.7 million barrels in the previous week after falling by 1.7 million barrels in the week before. The actual increase was much bigger than 0.5 million barrels predicted by analysts. At the same time, total motor gasoline inventories decreased by 3.0 million barrels.

FOMC cut its federal funds rate by 25 basis points to 1.5%-1.75%. Federal Reserve Chairman Jerome Powell said at a press conference after the meeting that “the current stance of monetary policy is likely to remain appropriate”. Markets interpreted the words as a sign that the Fed is going to pause its mid-cycle adjustment of interest rates.

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