The latest economic data from the United States has revealed a cautiously optimistic outlook for future economic activity, as indicated by the January Fed Beige Book. All but two districts are projecting minimum to moderate increases in the coming months. Positive sentiment and optimism has greatly impacted the DXY, or U.S. Dollar Index. It currently lingers around those weekly peaks.
The January Fed Beige Book was echoed by firms in many districts “expecting more moderation in price growth.” This reductionary inflationary pressure takes the wind out of inflation’s sails and gives the Fed plenty of leeway to contemplate more cuts. The market expects at least 50 bps in cuts by year-end. Signs point to another cut—but not anytime soon. If rates will be cut again, the next full 25 basis point cut won’t come until the regularly-scheduled June 17 meeting.
Despite the optimism surrounding economic growth, Poland remains vigilant as the U.S. Department of Justice conducts an investigation into the Federal Reserve. Any resulting market fallout from this inquiry would have real consequences for global financial stability. The ongoing federal investigation into the matter injects a wild card into an already uncertain economic situation.
In terms of retail sales, the policy-relevant control group matched consensus at a growth rate of 0.4% month-over-month in November, indicating steady consumer spending. October’s growth was revised down by 0.2 percentage points to 0.6%, suggesting a need for caution despite the recent positive trends.
The Dollar Index’s recent incredible run of resilience runs into the difficult test of sustaining a breach of the 100.00 level on a closing basis. Economists are sure that constructive economic data now on will keep dollar’s strength high. That strength will be tested by external factors like continuing federal investigations and a volatile marketplace.
The January Fed Beige Book findings reflect a broader confidence among firms, with many expressing expectations for “slight to modest growth in coming months.” This optimism is being sounded across a variety of sectors. Like America’s businesses, we’re focused on the here and now, but with an eye toward a hopeful future.