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Typically Quiet Fed Wednesday, Inflation Drops Due To ‘Eat Out To Help Out’

Published 16/09/2020, 09:08
Updated 21/10/2020, 09:15

It was a typical start to a Federal Reserve Wednesday, with mixed but limited movement from the European indices.

After a stellar showing on Tuesday, outstripping its peers to cross 6100 for the first time in 3 weeks, the FTSE stalled as trading got underway. Dipping half a percent – Rolls-Royce (LON:RR) was a major weight, the firm falling close to 4% – the index found itself struggling to stay above that key level, losing any sense of momentum it was building yesterday. Then again, it took a while for the FTSE to heat up on Tuesday, so the session is far from a write-off.

What makes the index’s slip interesting is that it came alongside a dip from the pound – just as it gains were paired with sterling growth on Tuesday. Falling 0.1% against the dollar and 0.2% against the euro, the currency was reacting to a better than forecast, if still sharp, ‘Eat Out to Help Out’-led decline in inflation in August. The latest reading came in at 0.2%, above the expected 0.1% but a long way off the previous month’s 1.0%.

At least the FTSE did something. The Eurozone indices were completely stagnant, uninteresting in doing anything until either a) some sign from the US this afternoon, or b) the Fed meeting this evening.

As for the Dow Jones, currently it is eyeing an 85 point increase after last night’s barely perceptible rise, once again attempting to open – and stay – above 28000.

In terms of what to expect from the Fed, a further articulation of its newly relaxed inflation policy – first revealed at the online Jackson Hole Symposium – is likely on the cards. Beyond that, potentially improved forecasts for the US economy, a reminder of the necessity that Congress get a bipartisan covid spending bill over the line, and perhaps a change in forward guidance.

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