Daily Financial Market News & Discussions

[SAN_The_Trader]

TODAY’S NEWS

We have relatively the same news across the board (EUR,USD & GBP)

• Flash Manufacturing PMI
• Flash Service PMI
• Retail Sales m/m

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Flash Manufacturing PMI (Purchasing Managers Index)

It’s an indicator of the economic health of the manufacturing sector. A Flash PMI is an early estimate of the PMI before the final data is released. It’s based on surveys of purchasing managers at manufacturing firms. The index is based on various factors such as new orders, production, employment, supplier deliveries, and inventories.

Significance to the economy and interest rates:

A reading above 50 indicates improving conditions (expansion), while below 50 indicates deteriorating economic climate(contraction).

• Higher than expected Flash Manufacturing PMI reading indicates that the manufacturing sector is growing indicating an overall economic expansion.

• Central banks closely monitor PMI data to gauge the strength of the economy. If manufacturing PMI is strong, it could influence central banks to consider raising interest rates to prevent overheating and control inflation. Conversely, a weak PMI may prompt central banks to lower interest rates to stimulate economic growth.

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Flash Service PMI (Purchasing Managers Index)

Similar to Manufacturing PMI, Flash Service PMI measures the economic health of the services sector. It includes industries such as finance, healthcare, retail, and transportation.

Significance to the economy and interest rates:

A reading above 50 indicates improving conditions (expansion), while below 50 indicates deteriorating economic climate (contraction).

• Strong Flash Service PMI suggests a robust growth in the service sector which is good for the economy and contributes in the overall economic expansion

• Central Banks use Flash Service PMI data to gauge the health of the economy. Strong data may prompt the Central Bank to consider raising interest rates to prevent inflation, while a weak PMI could prompt rate cuts to stimulate economic activity.

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Retail Sales

Retail Sales measures the change in total value of sales at the retail level on a month -over-month basis. It includes purchases of goods and services by individuals.

Retail Sales is the foremost indicator of consumer spending, which accounts for the majority of overall economic activity.

Significance to the economy and interest rates:

Retail Sales data provides insights into the strength of consumer demand

• Strong Retail Sales indicate health consumer confidence and spending which can lead to increased production, job creation and overall economic growth

• Central Banks consider Retail Sales data when making decisions on monetary policy. Higher-than-expected retail sales may prompt the central bank to consider raising interest rates to prevent overheating and control inflation. Conversely, weak retail sales could lead to rate cuts to stimulate spending and economic activity.

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SUMMARY

Today’s news will provide crucial insights into the overall health of the economy, indicating whether it is expanding or contracting. Central banks, such as the Federal Reserve, will use this data to inform their decisions on whether to raise or lower interest rates.

In light of yesterday’s news on GBP interest rates, today’s data will also help determine if the decision to remain neutral and maintain current interest rates aligns with the economic conditions.

I will be closely monitoring for any conflicting data, such as strong Service PMI figures alongside weak Manufacturing PMI figures

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Good luck, traders! I hope we’ve all gained some valuable insights today.

[SAN_The_Trader]

This Week’s News

This week does not have a lot of high impact news

[SAN_The_Trader]

TODAY’S NEWS

• Consumer Confidence

CONSUMER CONFIDENCE

I think we have covered this news before. Consumer Confidence is a vital data point used to gauge spending behavior and investors confidence in the economy.

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Significance of Consumer Confidence News to the economy

• High Consumer Confidence Data shows that the consumers have a positive outlook toward the economy and are willing to spend money to buy services and goods which stimulates the economy
• Low Consumer Confidence Data shows that the consumers have a negative outlook toward the economy and are not willing to spend money to buy services and goods which slows down the economy

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Significance of Consumer Confidence News to the Inflation

• High Consumer Confidence leads to increased consumer spending which leads to an increase in demand for goods and services, if supply cannot keep up with the demand then there will be an upward pressure on prices which leads to an increase in inflation.

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Significance of Consumer Confidence News to the Interest Rates

• High Consumer Confidence Data may prompt the Central Banks to raise interest rates in order to control inflation thereby preventing the economy from overheating.

• Low Consumer Confidence Data may prompt the central Banks to reduce Interest Rates in order to stimulate the economy which will encourage borrowing and spending of money on goods and services (increase consumer confidence)

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Significance of Consumer Confidence News to the Interest Rates.

Remember that Money Seeks Yield; investors aim for healthy returns on their investments. When Consumer Confidence is high, it indicates a positive outlook for the economy, which attracts investors to invest in it, leading to a bullish dollar.

The Central Banks/ Federal Reserve consider consumer confidence as a crucial data point which influences their monetary policy decisions. If consumer confidence is high and economic growth is robust, central banks may be more inclined to tighten monetary policy by raising interest rates to prevent overheating and control inflation. Higher interest rates can make holding assets denominated in that currency more attractive to investors, thus supporting the value of the dollar.

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SUMMARY

• High Consumer Confidence = Positive Economy Outlook = Higher Dollar
• Low Consumer Confidence = Negative Economy Outlook = Lower Dollar

Remember that when it comes to fundamental you have to consider the overall fundamental news to get a clearer picture of what is going on in the economy and to be able to deduce possible moves by the central banks. (Raise, Reduce or Maintain Interest Rates)

[SAN_The_Trader]

TODAY’s NEWS

• New Home Sales

NEW HOME SALES

New Home Sales refers to a key economic indicator that tracks the number of newly constructed homes that have been sold during a given month in the United States.

Significance of New Home Sales to the Economy

• Construction and sale of new homes stimulate various sectors of the economy. It directly contributes to economic growth through spending on construction materials, labor and other related services (Plumbing, electricians etc).
• Purchasing and building of new homes also involves additional spending on furniture etc which boosts economic activity.

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Significance of New Home Sales to Inflation

New home sales can influence inflation in several ways.

• Increased demand for homes can drive up prices of housing-related goods and services such as lumber, roofing materials etc which can lead to higher prices
• Rising home prices can contribute to broader inflationary pressure as housing costs are a significant component of (CPI) Consumer Price Index and other inflation measures.

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Significance of New Home Sales to Interest Rates

• Strong Home Sales Data suggests a robust housing market and broader economic activity potentially promptingth e Federal Reserve to consider raising interest rates to curb inflationary pressures
• Weak New Home Sales indicate that the economy is slowing down which may prompt the Federal Reserve to lower interest rates in order to stimulate the economy by making borrowing cheaper.

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SUMMARY

New Home Sales is a crucial economic indicator that significantly influences the Federal Reserve’s decisions on adjusting interest rates. This data is vital for policymakers in their efforts to manage and control inflation.

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Have a blessed, profitable day.

[SAN_The_Trader]

TODAY’s NEWS (USD)

I had some internet issues today but I have just resolved it. Let’s dive into today’s economic news updates.

• Final GDP q/q
• Unemployment Claims
• Pending Home Sales m/m

Yesterday, we had the New Home Sales data. From that, we can infer some insights into Pending Home Sales m/m. We will still explore what Pending Home Sales m/m entails and its significance to the economy.

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Final GDP q/q

• GDP (Gross Domestic Product): Measures the annualized change in the inflation-adjusted value of all goods and services produced by the economy.

Final GDP q/q measures the change in the inflation-adjusted value of all goods and services produced by the economy during the last quarter compared to the previous quarter. (Lagging Data)

Relevance of Final GDP q/q to the economy.

• GDP is a critical measure of economic health and growth. A positive GDP q/q indicates economic expansion, while a negative one suggests contraction in the economy.

Relevance of Final GDP q/q to the inflation and interest rates.

One of the main tools used by the Federal Reserve to fight inflation is adjusting interest rates (rising or lowering interest rates)

Inflation: Inflation is a gradual loss of purchasing power, reflected in a broad rise in prices for goods and services over time.

• Higher GDP growth typically correlates with higher inflationary pressures due to an increase in demand for services and goods, this might prompt the Federal Reserve to increase interest rates to curb inflation.

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Unemployment Claims:

Unemployment Claims measures the number of individuals who filed for unemployment insurance for the first time during the past week.

An unemployment claim is a request for cash benefits made by an individual after they are laid off from their jobs.

Relevance of Unemployment Claims to the economy.

• Unemployment claims indicate the number of people newly out of work, reflecting the health of the job market. Lower claims suggest a strong labor market, while higher claims indicate economic stress

Relevance of Unemployment Claims to the inflation and interest rates.

• Lower unemployment claims generally correlate with economic growth and potentially higher inflation, as demand for labor increases. The Federal Reserve might adjust interest rates based on trends in unemployment claims to support employment and manage inflation.

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Pending Home Sales m/m:

Pending Home Sales m/m measures the change in number of homes under contract to be sold but have not yet been acquired. The data is compared with previous month data.

Relevance of Pending Home Sales m/m to the economy.

• Pending home sales are a leading indicator of future home sales activity and reflect consumer confidence and financial health.

Relevance of Pending Home Sales m/m to the economy.

• Increasing pending home sales indicate a strong housing market, which can contribute to inflation through higher demand for construction materials and services. Central banks may monitor this data to gauge economic activity and its potential impact on inflation and interest rates.

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SUMMARY

Out of all the above news, Final GDP q/q gives a general snapshot of the economy health as it covers all the sectors of the economy. Therefore, it carries significant weight in interpreting today’s data.

Unemployment Claims Data gives a snapshot of the labor sector of the economy while Pending Home Sales m/m data gives s snapshot of the housing sector of the economy.

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Good luck and Have a blessed day

[SAN_The_Trader]

#TODAY’S NEWS (USD)

• Core PCE Price Index m/m

Forex Factory

Core PCE Price Index m/m

PCE (Personal Consumption Expenditures): also known as consumer spending, is a measure of the spending on goods and services by people of the United States.

PCE Index measures the changes in the price of goods and services purchased by consumers, excluding food and energy prices. It is expressed as a month-over-month (m/m) percentage change, which means it compares the current month’s data to the previous month’s data.

PCE is considered as the preferred measure of inflation by the Federal Reserve.

Significance to the Economy

• The Core PCE Price Index is a vital indicator of underlying inflation trends because it excludes the more volatile food and energy prices, providing a clearer view of long-term inflation trends. This index is closely watched by economists, policymakers, and investors to gauge the inflationary pressures within the economy.

Significance to the Inflation and Interest Rates

1. Inflation

• Rising PCE index indicates increasing prices for goods and services signifying inflationary pressures in the economy.

2. Interest Rates

• Federal Reserve Policy: The Federal Reserve closely monitors the Core PCE Price Index when making decisions about monetary policy. If the index shows rising inflation beyond the Fed’s target the Fed might consider raising interest rates to cool down the economy and bring inflation back to target levels.
• Borrowing Costs: Higher interest rates increase the cost of borrowing for consumers and businesses, which can reduce spending and investment, slowing down economic growth. Conversely, if the Core PCE is low, the Fed may lower interest rates to stimulate economic activity.

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SUMMARY

• PCE Index is the preferred measure of inflation by the Federal Reserve.
• Rising Core PCE can lead to higher interest rates as the Fed attempts to manage inflation.
• Lower Core PCE may result in lower interest rates to spur economic growth.

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Goodluck in your trading & stay patient and adaptive to what the market offers

[SAN_The_Trader]

This Week’s News

1. This is NFP week (First week of the month)

[SAN_The_Trader]

TODAY’S NEWS (USD)

• ISM Manufacturing PMI (10:00 am EST)

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ISM Manufacturing PMI

The ISM manufacturing index is also known as the purchasing managers’ index (PMI).

The ISM Manufacturing PMI is a monthly indicator of economic activity in the manufacturing sector of the United States. It is based on a survey of purchasing managers at more than 300 manufacturing firms and covers various aspects of their businesses, including new orders, production, employment, supplier deliveries, and inventories.

Significance to the Economy.

• Manufacturing is a significant part of the economy, a strong PMI suggests a robust economic growth. Weak PMI indicates potential economic slowdown.
• PMI above 50 indicates that the manufacturing sector is expanding (Growth in the manufacturing sector)
• PMI below 50 indicates contraction in the manufacturing sector

Significance to Inflation.

• Price Trends: The PMI includes a component that measures changes in prices of raw materials. If this component shows rising prices, it suggests upward pressure on inflation as higher production costs may be passed on to consumers.

• Demand-Supply Balance: High PMI readings often reflect increased demand, which can lead to higher prices if supply doesn’t keep up, contributing to inflation.

Significance to Interest Rates.

Interest Rates is one of the tools used by the Federal Reserve to keep inflation in check, it is used to either stimulate or slow down the economy.

• Federal Reserve Policy: The Federal Reserve closely monitors economic indicators like the PMI. A strong PMI can signal economic strength, potentially leading the Fed to raise interest rates to curb inflation.
• Borrowing Costs: Higher interest rates make borrowing more expensive for businesses and consumers, which can dampen spending and investment, helping to control inflation but also potentially slowing economic growth.

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SUMMARY

The ISM Manufacturing PMI (Purchasing Managers’ Index) is a vital economic indicator that provide insights into the Manufacturing Sector health.

It reveals whether the sector is expanding or contracting and indicates inflationary trends within the industry. This data is closely monitored by the Federal Reserve and can influence potential shifts in monetary policy.

[SAN_The_Trader]

TODAY’S NEWS (USD)

1. Fed Chair Powell Speaks
2. JOLTS Job Openings

Fed Chair Powell Speaks

When the Federal Reserve Chair, currently Jerome Powell, speaks, it’s closely watched by financial markets, economists, and policymakers. Powell’s speeches often provide insights into the Fed’s current thinking on monetary policy, economic outlook, and potential future actions.

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Significance to the economy

Powell’s remarks can influence market expectations about interest rates, inflation, and economic growth. For example, if he signals that the Fed may raise interest rates to combat inflation, it could affect borrowing costs for businesses and consumers, potentially slowing down economic activity.

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Significance to the inflation

Comments about inflation can impact market expectations. If Powell suggests that inflation is higher or more persistent than anticipated, it might lead to speculation that the Fed could take more aggressive actions, like raising interest rates sooner.

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Significance to the interest rates

Any hints about the Fed’s stance on interest rates directly affect markets. If Powell indicates a more hawkish stance (indicating potential rate hikes), bond yields might rise as investors anticipate higher borrowing costs.

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I highly recommend listening to his speech. It provides valuable insights into the factors the Federal Reserve considers when formulating monetary policy.

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JOLTS Job Openings

JOLTS Job Openings (Job Openings and Labor Turnover Survey): monthly report done by the U.S. Bureau of Labor Statistics, provides data on job openings, hires, and separations within the U.S. labor market.

Significance to the economy

Job openings are a key indicator of labor demand and it reflects the health of the labor market

• Job Openings: High job openings relative to unemployment can indicate potential labor shortages, which might pressure wages higher.
  High levels of job openings indicate strong demand for labor, which usually reflects a growing economy. It suggests that businesses are expanding and need more workers.
• Hires and Separations: The number of hires indicates how many positions are being filled, while separations (quits, layoffs, and discharges) provide insights into job stability and worker confidence. A high quit rate often suggests that workers feel confident enough in the job market to leave their current positions for better opportunities.

Significance to the inflation

• If job openings are high and unemployment is low, it could lead to upward pressure on wages as companies compete for workers. Higher wages can contribute to overall inflationary pressures in the economy.

Significance to the interest rates

• The Federal Reserve considers various labor market indicators, including JOLTS data, to assess the state of the economy. A strong job openings report might suggest a tightening labor market, influencing the Fed’s decisions on interest rates to manage inflation and economic growth.

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Summary

Fed Chair Powell’s upcoming speech is crucial as it will provide insights into the Federal Reserve’s stance on the economy and potential future monetary policies.

The JOLTS data will offer additional clues on the labor market’s health, which can influence the Fed’s decisions regarding interest rates and economic policy.

[SAN_The_Trader]

TODAY’S NEWS (USD)

1. ADP Non-Farm Employment Change
2. Unemployment Claims
3. ISM Services PMI
4. FOMC Meeting Minutes

We have several Red Folder news today, keep your risk in check.

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ADP Non-Farm Employment Change

This is a monthly measure of the change in private-sector employment, excluding farming jobs. It is released by the ADP Research Institute and often serves as a precursor to the official government employment report.

The report tracks changes in employment across various sectors, excluding agriculture. It shows employment trends in the economy.

Significance to the Economy

• ADP Non-Farm Report provides an early indication of the job market’s health. Strong job growth suggests economic expansion, while weak job growth may indicate economic slowdown.

Significance to the Inflation

• If the report shows significant job growth, it could lead to higher wages as employers compete for workers. Increased wages can contribute to inflation if businesses pass higher labor costs onto consumers.

Significance to the Interest Rates

• The Federal Reserve monitors employment data closely. Strong job growth might lead the Fed to raise interest rates to prevent the economy from overheating, while weak job growth could lead to lower rates to stimulate economic activity.

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Unemployment Claims

Unemployment Claims measure the number of individuals filing for unemployment benefits for the first time due to job loss or reduced work hours.

This data provide insights into the health of the labor market

Significance to the Economy

• Rising unemployment claims can signal a weakening labor market
• Falling Unemployment Claims can signal a strengthening labor market

Significance to the Inflation

• High unemployment claims can reduce consumer spending, which might ease inflationary pressures.
• Low claims suggest robust employment, which could contribute to inflation through increased consumer spending and wage growth.

Significance to the Interest Rates

The Fed uses unemployment claims data to gauge labor market health. Persistent high claims may prompt the Fed to lower interest rates to stimulate job growth, while low claims might lead to higher rates to prevent inflation.

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ISM Services PMI

The ISM Services PMI (Purchasing Managers’ Index) is a monthly report that measures the economic health of the U.S. service sector.

Significance to the Economy

The ISM Services PMI (Purchasing Managers’ Index) provides insights into the health of the U.S. services sector.

• A PMI above 50 indicates expansion in the Service Sector.
• A PMI below 50 indicates contraction in the Service Sector.

Significance to the Inflation

• A high PMI can signal increased demand for services, which might lead to higher prices and contribute to inflation.
• Low PMI suggests weaker demand and potentially lower inflation

Significance to the Interest Rates

The Fed considers PMI data when assessing economic conditions.

• A strong PMI might lead to higher interest rates to manage inflation, while a weak PMI could result in lower rates to encourage growth.

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FOMC Meeting Minutes

The Federal Open Market Committee (FOMC) Meeting Minutes are detailed records of the Fed’s monetary policy meetings. They provide insights into the deliberations and considerations of Fed policymakers.

Significance to the Economy

The minutes reveal the Fed’s views on economic conditions, risks, and the rationale behind their policy decisions. This transparency helps markets understand the Fed’s future actions.

Significance to the Inflation

The minutes often discuss inflation trends and the Fed’s approach to managing inflation. Insights into the Fed’s inflation outlook can influence market expectations.

Significance to the Interest Rates

The minutes provide clues about future interest rate changes. If the Fed expresses concerns about inflation, it may signal potential rate hikes. Conversely, concerns about economic growth could indicate potential rate cuts.

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SUMMARY

Today, we’ll receive data on the Employment and Service sectors, which will help gauge the current level of inflation—whether it’s cooling down or heating up.

The FOMC Minutes will provide insights into the Federal Reserve’s future actions and their assessment of the economy’s health.

[SAN_The_Trader]

TODAY’S NEWS (USD & GBP)

• Bank Holiday: Expect Low volatility on USD pairs.
• Parliamentary Elections: GBP

If you must trade avoid this two currencies.

Goodluck

[SAN_The_Trader]

TODAY’S NEWS USD

Today we have a major Red Folder news, (Non-Farm Employment Change)

1. Non-Farm Employment Change
2. Average Hourly Earnings m/m
3. Unemployment Rate

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Non-Farm Payroll

NFP gives insight into the health of the Labor Market

The Non-Farm Payroll (NFP) report is a key economic indicator released monthly by the U.S. Bureau of Labor Statistics. It measures the change in the number of paid employees in the U.S. excluding the farming industry, government employees, private household employees, and employees of nonprofit organizations.

Significance to the Economy

• A high NFP number indicates robust job creation and a growing economy.
• A low or negative number suggests shrinking Labor Market which implies economic weakness.
• Business Confidence: Strong NFP figures typically reflect business confidence, as companies are more likely to hire when they expect positive economic conditions. Conversely, weak NFP numbers may indicate uncertainty or pessimism about the economy.

Significance to the Inflation

• Wage Pressure: An increase in non-farm payrolls can lead to higher demand for labor, which may push wages up. Higher wages increase consumers’ purchasing power, potentially driving up demand for goods and services and contributing to inflation.
• Consumer Spending: As more people gain employment and existing employees see wage increases, consumer spending tends to rise, which can fuel inflation if demand outpaces supply

Significance to the Interest Rates

The Federal Reserve closely monitors NFP data as part of its mandate to manage inflation and ensure maximum employment.

• Strong job growth can prompt the Fed to raise interest rates to prevent the economy from overheating and to keep inflation in check.
• If NFP data shows weak job growth, the Fed might consider lowering interest rates or maintaining low rates to stimulate economic activity and support job creation.
  (strong NFP data may lead to rate hikes to temper inflationary pressures.)

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Average Hourly Earnings m/m

The Average Hourly Earnings report measures the change in the price businesses pay for labor, excluding the farming industry, on a monthly basis.

It is an important indicator of wage inflation.

Significance to the Economy

• Rising average hourly earnings indicate increased consumer income, which can boost consumer spending and overall economic growth. However, if wage growth is too rapid, it can strain business profitability.

Significance to the Inflation

Wage growth is a major component of inflation.

• If average hourly earnings are increasing rapidly, it can lead to higher overall inflation as businesses raise prices to cover higher wage costs.

Significance to the Interest Rates

The Fed watches wage growth closely.

• If average hourly earnings are rising quickly, the Fed may raise interest rates to control inflation.
• Slow wage growth might lead to lower interest rates to encourage spending and investment

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Unemployment Rate

The Unemployment Rate measures the percentage of the total labor force that is unemployed but actively seeking employment and willing to work.

It is a key indicator of labor market health.

Significance to the Economy

• A low unemployment rate indicates a healthy economy with strong job creation.
• High unemployment rate suggests economic weakness and potentially insufficient job opportunities.

Significance to the Inflation

• A low unemployment rate can lead to higher wages as employers compete for a smaller pool of workers, contributing to inflation.
• High unemployment rate can reduce wage pressure and ease inflation.

Significance to the Interest Rates

The Fed uses the unemployment rate as a key indicator when setting monetary policy.

• A low unemployment rate might lead the Fed to raise interest rates to prevent the economy from overheating.
• High unemployment rate could lead to lower rates to stimulate job creation and economic growth.

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SUMMARY

Today’s news focuses on the labor sector of the economy. These three indicators provide a comprehensive view of the labor market, influencing economic activity, inflation trends, and the Federal Reserve’s interest rate policies.

[SAN_The_Trader]

Key Factors in Choosing a Prop Trading Account + Best Deal Alert

If you’re considering purchasing a new prop account, I’ve shared a Twitter Thread outlining the key factors I evaluate before making a decision, along with the best current deal on Prop Firm Match.

Your retweets and follows would be greatly appreciated

SAN The Trader (@SAN_The_Trader) on X

[SAN_The_Trader]

This Week’s News

No USD news today which is the currency I usually focus on. I will not be trading today.

[SAN_The_Trader]

TODAY’S NEWS (USD)

Today we have a major Red Folder news event, (Fed Powell Speech)
If you have been actively following the content here you know that we have covered this particular event before, but repetition will make it easier to understand fundamentals and its significance to the market

• Fed Chair Powell Testifies

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Fed Chair Powell Testifies

This will be a very significant event as it will inform us of the FED stance regarding interest rates, inflation and the economy health in general.

Powell’s speeches often provide insights into the Fed’s current thinking on monetary policy, economic outlook, and potential future actions

Significance to the economy

Powell’s remarks can influence market expectations about interest rates, inflation, and economic growth.

• If he signals that the Fed may raise interest rates to combat inflation, it could affect borrowing costs for businesses and consumers, potentially slowing down economic activity.
  (High Interest rates makes Loans expensive and inaccessible to many)
• if he signals that the Fed may reduce interest rates to combat inflation, it could affect borrowing costs for businesses and consumers, easy potentially stimulating economic activity
  (Low Interest rates makes Loans cheap and accessible to many)

Significance to the inflation

Comments about inflation can impact market expectations.

• If Powell suggests that inflation is higher or more persistent than anticipated, it might lead to speculation that the Fed could take more aggressive actions, like raising interest rates sooner.
• If Powell suggests that inflation is lower or less persistent than anticipated, it might lead to speculation that the Fed could take less aggressive actions, like keeping interest rates lower for longer.

Significance to the inflation

Any hints about the Fed’s stance on interest rates directly affect markets.

• If Powell indicates a more hawkish stance (indicating potential rate hikes), bond yields might rise as investors anticipate higher borrowing costs.

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SUMMARY

Fed Chair Powell’s testimony sheds light on the factors influencing the Federal Reserve’s decisions, including inflation, economic health, and employment rates.

Today’s speech provides insights into the Fed’s assessment of the economy’s performance and the nature of inflation (whether it is persistent or not), helping us predict future Fed actions.

Goodluck in your trading and stay informed

[Noni]

TODAY’S NEWS (USD)

• Fed Chair Powell Testifies

Federal Reserve Chair Jerome Powell is due to testify about the Semi-Annual Monetary Policy Report before the House Financial Services Committee in Washington, D.C. This testimony is a key event where Powell will provide insights into the current state of the U.S. economy, discuss recent monetary policy decisions, and address concerns from lawmakers. Topics likely to be covered include inflation, interest rates, economic growth, and employment.

When Federal Reserve Chair Jerome Powell testifies, his tone can be categorized as either hawkish or dovish, which holds significant implications for financial markets and the broader economy.

Hawkish Tone

1. Interest Rate Hikes: If Powell adopts a hawkish tone, it signals that the Federal Reserve is likely to raise interest rates to combat inflation. This can lead to higher borrowing costs for consumers and businesses.
2. Strong Economic Outlook: A hawkish stance suggests confidence in the strength of the economy and its ability to handle higher interest rates without stalling growth.
3. Inflation Concerns: Emphasizing the need to control inflation, a hawkish Powell might indicate that inflation is running too high and requires tighter monetary policy.
4. Market Impact: Financial markets may react with increased volatility. Stock prices could fall as higher interest rates can dampen corporate profits, while bond yields may rise.
5. Currency Strength: A hawkish Fed can lead to a stronger U.S. dollar as higher interest rates attract foreign investors seeking better returns.

Dovish Tone

1. Interest Rate Cuts or Stability: A dovish tone suggests that the Federal Reserve is more inclined to keep interest rates low or even cut them to stimulate economic growth.
2. Economic Caution: This stance indicates concerns about economic growth, unemployment, or other downside risks, suggesting a need for supportive monetary policy.
3. Focus on Employment: Powell might emphasize the importance of achieving full employment and supporting the labor market.
4. Market Impact: Markets often react positively to dovish signals. Stocks may rise as low interest rates boost corporate profits and economic activity, while bond yields might decline.
5. Currency Weakness: A dovish Fed can lead to a weaker U.S. dollar as lower interest rates make dollar-denominated assets less attractive to foreign investors.

Overall Significance

The distinction between a hawkish and dovish tone is crucial for setting market expectations. Investors, businesses, and policymakers closely watch Powell’s testimonies to adjust their strategies accordingly. A hawkish tone generally indicates tighter monetary policy ahead, while a dovish tone suggests a more accommodative approach.

[SAN_The_Trader]

Awesome

Hawkish Or Dovish

Lets see what transpires, if you have time you can watch the Powell event on youtube.

[Noni]

I’ll be listening to what he has to say.

[SAN_The_Trader]

TODAY’S NEWS (USD)

• Core CPI m/m
• CPI m/m
• CPI y/y
• Unemployment Claims

We have covered all the above news before. Based on what Powell said, we will be looking for signs of a strong Labor Sector of the economy and cooling inflation. Today’s data will be crucial, CPI is abou Inflation while Unemployment Claims will inform us of the health of the Labor Sector.

Healthy Labor Sector and Cooling Inflation will prompt the Federal Reserve to reduce interest rate.

[SAN_The_Trader]

TODAY’S NEWS (USD)

1. Core PPI mm
2. PPI m/m
3. Prelim UoM Consumer Sentiment

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Core PPI m/m

(Producer Price Index, excluding food and energy)

Core PPI Price Index (PPI) measures the average change over time in the selling price received by domestic producers for their output, excluding the volatile food and energy sector. It is released monthly by the US Bureau of Labor Statistics

Significance to the Economy

The Core PPI provides insights into the underlying inflationary pressures in the economy. Since it excludes food and energy, it offers a clearer view of long-term inflation trends without the noise of volatile price changes in these categories.

Significance to Inflation

An increase in Core PPI indicates rising production costs, which can be passed on to consumers in the form of higher retail prices, contributing to consumer inflation.

Significance to Interest Rates

The Federal Reserve closely monitors Core PPI as an indicator of inflationary pressures.

• If Core PPI rises significantly, it may prompt the Fed to consider raising interest rates to combat inflation.
• Low or declining Core PPI may lead to lower interest rates to stimulate economic activity.

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PPI m/m

(Producer Price Index, including food and energy)

The Producer Price Index (PPI) measures the average change over time in the selling prices received by domestic producers for their output, including food and energy. It is released monthly by the U.S. Bureau of Labor Statistics.

Significance to the Economy

The PPI provides a comprehensive view of price changes at the wholesale level, reflecting the cost pressures that producers face. It can signal future changes in consumer prices, as producers may pass on higher costs to consumers.

Significance to the Inflation

An increase in PPI suggests higher production costs, which can lead to increased prices for goods and services at the consumer level, thereby contributing to inflation.

Significance to the Economy

The Federal Reserve monitors PPI as part of its assessment of inflationary trends.

• Rising PPI can lead the Fed to raise interest rates to control inflation.
• Stable or falling PPI might support maintaining or lowering rates to encourage economic growth.

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Prelim UoM Consumer Sentiment.

The University of Michigan Consumer Sentiment Index measures consumer confidence in economic activity. It is based on a survey of consumers and is released twice a month—preliminary and final.

Significance to the Economy

Consumer sentiment is a leading indicator of consumer spending, which accounts for a significant portion of economic activity.

• Higher consumer sentiment suggests that consumers are more likely to spend, boosting economic growth.

Significance to the Inflation

• Increased consumer confidence can lead to higher spending, which may drive demand-pull inflation as demand for goods and services increases.

Significance to the Interest Rates

The Federal Reserve considers consumer sentiment when making policy decisions.

• High consumer confidence might lead to concerns about overheating the economy, prompting rate hikes.
• Low confidence may result in rate cuts or maintaining low rates to stimulate spending and investment.

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SUMMARY

Today’s news data event is all about inflation, Personally I expect to see data supporting that inflation is cooling, this will prompt the Federal Reserve to reduce interest rates earlier.