Consistently strong moves in indices over the past couples of sessions following promising signs in the economic data publications. The inflation rate in the UK fell below expectations, at 2.2% versus 2.3%, a shortfall that would be emulated by the US data later in the day. Although US CPI was somewhat of a mixed bag, the fact remains that the inflation rate fell to just 2.9% in July, now within touching range of the Fed’s long awaited target. Yesterday laid even more good news on the table in the form of US retail sales, which came in at 1%, far higher than the consensus of just 0.3%.
US indices took the news well, opening high across the board and finishing higher still. The Dow Jones closed the day 1.4% in the black, the S&P 500 gained 1.6% and the Nasdaq Composite earned an admirable 2.3%. European and Asian markets have also performed well over the last few sessions, completely recovering from last week’s flash crash. Especially impressive for the Nikkei 225, which bore the brunt of the sell-off, now up over 20% since the lows of last Monday.
The solid US economic data also opened the possibility of less aggressive rate cuts from the Fed, painting a more favourable picture for the Dollar. The DXY gained half a percent yesterday, mostly to the detriment of the Euro and the Yen, which is now starting to eye the dreaded 150 level once again. Cable gained some traction this morning following UK retail sales, currently hovering under $1.29.
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