Fed Beige Book Shows 'Moderate' Growth, USD Neutral
THE TAKEAWAY:[Fed’s Beige Book released] > [Overall economic activity expanded at moderate pace; consumer spending grew modestly; employment remained unchanged]> [EURUSD Neutral]
The latest Federal Reserve Beige Book, which was released today, revealed that the U.S. economy “expanded at a moderate pace” from late February to early April across twelve Fed districts, with five districts citing “modest” economic growth. Especially, the New York and Dallas districts reported slightly acceleration in expansion.
The Beige Book report, which is usually released two weeks before the Federal Open Market Committee (FOMC) meets to set monetary policy, offers anecdotal evidence that helps policy makers assess the condition of the economy and actions going forward.
Most of the Fed’s twelve regional banks indicated increases in consumer spending, while manufacturing activity held steady or increased. Residential and commercial real estate was reported to continue to improve in general. In new home construction, most districts saw picking up. Home prices were rising in many areas of the country. Some regions, such as San Francisco and Chicago districts, reported weakness in military or defense-related sectors.
On the labor market, employment conditions were unchanged or improved to some extent while wage pressures were generally contained. Yet hiring was more limited in Boston and Cleveland areas. Overall, most districts described optimistic outlook in near-term, despite of some uncertainty in fiscal policy and health care reform.
In the most recent FOMC minutes, we saw a growing number of members who suggested slowdown or an end of the quantitative easing program by the end of 2013. With improved economic data, the central bank may start to discuss a tentative exit strategy in the second-half of the year if the labor market outlook advances substantially.
EURUSD 1-minute Chart: April 17 2013
Chart created using Marketscope 2.0– Prepared by Renee Mu
The U.S. dollar showed a fairly muted reaction to the release, with the EURUSD just edging down to $1.3031. At the time this report was written, the EURUSD pair was trading lower at $1.3014.
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--- Written by Renee Mu DailyFX Research