Gold News

The Krips Report : Unexpected Fall in US Consumer Confidence

By March 21, 2016 No Comments

The FTSE closed slightly lower on Friday as the rally in oil prices snapped and a key survey showed an unexpected fall in US consumer confidence.

Oil prices have risen more than 50% from 12-year lows reached in December after Organization of the Petroleum Exporting Countries (OPEC) floated the idea of a production freeze.

In economic data, the University of Michigan’s consumer sentiment index unexpectedly fell in March, to a reading of 90.0 from 91.7 in February and versus expectations of 92.2.

Capital Economics said the decline in the consumer sentiment index “illustrates that higher gasoline prices more than offset the positive impact to sentiment from the rebound in stock markets”.

Meanwhile, Federal Reserve Bank of New York President William Dudley said the financial system is “much more resilient” following the 2008 crisis, but “more work still lies ahead” to prevent another one from happening. Dudley said there were limits to the supervision of banks in averting another crash and urged policymakers to find ways to better educate the industry about the role of supervisors.

On Thursday the BoE unanimously agreed to maintain rates at 0.5% and leave the asset purchase programme at £375bn, as expected by analysts.

The decision to stand pat on policy comes amid concerns about weak wage growth, low inflation and a global economic slowdown. Political uncertainty surrounding Britain’s 23 June referendum on its European Union membership was also taken into account.

“There appears to be increased uncertainty surrounding the forthcoming referendum on UK membership of the European Union,” the BoE’s Monetary Policy Committee said in the minutes of the March meeting.

“That uncertainty is likely to have been a significant driver of the decline in sterling. It may also delay some spending decisions and depress growth of aggregate demand in the near term.”

The decision follows the same path taken by the Federal Reserve and the Bank of Japan this week to stand pat on policy measures.

The Fed said on Wednesday that it now expects to raise rates twice this year compared to December’s prediction for four rate hikes.

The European Central Bank’s chief economist Peter Praet said further cuts to interest rates are possible if the central bank’s recently announced barrage of measures fail to boost the economy.

“We have not reached the physical lower bound. If new negative shocks should worsen the outlook or if financing conditions should not adjust in the direction and to the extent that is necessary to boost the economy and inflation, a rate reduction remains in our armoury,” he told Italian newspaper La Repubblica.

German producer prices fell more than expected in February, according to the latest data from Destatis. Producer prices dropped 0.5% from January, which was steeper than the 0.2% decline pencilled in by economists, as energy prices slid 9.4% on the month. On the year, producer prices were down 3%, missing expectations for a 2.6% drop.