Global macro overview for 01/06/2017:
The Fed's Beige Book data appears to support the interest rate hikes in the future, but the Devil is in the details. The latest Federal Reserve Summary on Current Economic Conditions (Beige Book) said the economy expanded at a "modest to moderate" pace through late May but that growth slowed in some regions. The manufacturing sector continued to expand at a modest pace and there was steady growth in most non-financial services sectors. The decline was noted in consumer spending, that softened in many states. The job market is still performing well among all other sectors of the economy as most US states reported that employment continued to grow at a modest to moderate pace. Wages are not growing as fast as expected, but most of the companies reported a willingness to increase wages where workers shortages were most severe. Nevertheless, in the near future, the tight job market should provide a boost to the wage growth, but for now, there is still no official uptrend in wages. Last, but not least, the FED is concerned about a lack of inflationary pressures despite the increase in final demand prices.
In conclusion, the Beige Book report might start raising questions about whether the FED will rethink its strategy after an expected increase in interest rates in mid-June. Despite a tight labour market, a lack of inflation grow and poor wages growth might indicate a pause in the interest rate hike cycle expected further this year. This would indicate the US Dollar's further depreciation after a failure on the highly anticipated Trump's economic reforms.
Let's now take a look at the US Dollar Index technical picture on the H4 time frame. The market is trading below all of the moving averages, close to the important support at the level of 96.80. Momentum indicator points down and the next support is seen at the level of 95.91. On the other hand, the nearest technical resistance is seen at the level of 97.20 and 97.80.
