KUWAIT, Aug 28 (KUNA) -- The National Bank of Kuwait issued a report on Sunday shedding light on the global financial markets, forecasting interest increase by the United States of America.
The NBK report indicated that a recent speech by the US Federal Reserves Chief, Janet Yellen, boosted forecast interest rate increase, as the US economy has approached the central bank’s goals on full employment and stable prices. Although she did not give specific timing of the next move, she mentioned that the FOMC continues to anticipate that gradual increases in the federal funds rate will be appropriate over time to achieve and sustain employment and inflation near our statutory objectives. Subsequently, markets repriced the odds of the Fed moving interest rates higher to 42% in September and 65% in December.
(The Federal Open Market Committee (FOMC) is the branch of the Federal Reserve Board that determines the direction of monetary policy).
On the currency front, the US dollar index initial move was a spike higher. Then on inspection, the Dollar reversed, however managed to end the week higher at 95.59 after Yellen’s speech. Market confusion continues demonstrating the division of opinions amongst the FOMC members. Esther George continues to push her dissenting view for a hike, having voted for a move in July. Meanwhile, Robert Kaplan said the Fed should raise interest rates "patiently, and gradually, and cautiously".
The NBK noted that US new home sales Jumped In July, surging to the highest in nearly eight years that month, as home builders picked up the pace while buyer demand remained strong. New home sales jumped tremendously by 12.4 percent to 654,000 in July to the highest in nearly eight years as the demand for new homes remained resilient. The new figures are 31.3 percent higher than a year ago and easily beat the forecasts of a 581,000. Existing Home Sales Dropped for the First Time since November 2015 US existing home sales lost momentum in July and decreased by 3.2 percent m/m to 5.39 million (annualized) after reaching a post-recession high of 5.57 million in June. Sales dropped for the first time since November 2015, as a lack of inventory limited the choices for buyers. On the other hand, a rise in prices suggests the housing market remains on solid ground. Sales of single-family homes fell by 2 percent m/m to 4.82 million. However, the market remains in short supply, which is keeping pressure on home prices. Median prices advanced by 5.3 percent y/y, up from a 4.8 percent pace in June.
US Durable Goods Orders Climbed by 4.4 percent. Orders for business equipment climbed in July for a second month, which indicates that US companies are willing to invest more in the economy. Durable goods orders impressed with sharp gains of 4.4 percent, compared to the forecast of 3.4 percent. This marked the strongest gain since January. The positive readings point to stronger demand for durable goods, which translates into an increase in new jobs in the near future of the business sector. Moreover, core durable goods orders rebounded after two declines, posting an excellent gain of 1.5 percent. The latest data easily beats the market forecast of 0.4 percent.
The number of Americans who applied for unemployment benefits last week dropped by 1,000 to 261,000 and remained near post recession lows, indicating a healthy labor market in which few people are losing their jobs. The average of new jobless claims over the past month dropped by 1,250 to 264,000, the Labor Department said. There were no special factors impacting this week's initial claims. Claims fell below the key 300,000 threshold in early 2015 and have remained there for 77 straight weeks, the longest streak since 1970.
The US economic growth was a bit more sluggish than initially thought in the second quarter. US growth expanded at a 1.1 percent annual rate in its second estimate of GDP. That was slightly down from the 1.2 percent rate reported last month. The revision also reflected weak spending by state and local governments and the economy has struggled to regain momentum since output started slowing in the last six months of 2015. The third quarter data so far has been mixed a strong labor market should continue to support consumer spending and growth in the coming quarters. (end) fnk.rk