Fed's Beige Book Doesn’t Evoke the Taper, Dollar Steady
THE TAKEAWAY: Fed’s Beige Book shows economy is growing at a ‘modest to moderate’ pace > ‘Taper’ debate continues > EURUSD breakout risk rises
A Fed report that traders are monitoring for evidence as to how the ‘taper’ debate will fall showed that US growth continued to run at a ‘modest to moderate’ pace. Meanwhile, construction and housing sectors improved at a ‘moderate to strong’ pace across all Districts. With specific interest for those watching the bank’s dual mandates (full employment and steady inflation), it was noted that some Districts are experiencing a greater pace in hiring - while some of the Fed’s contacts stated that they were having trouble finding qualified workers. Contrasting the recent dip in the ISM report Monday, the report noted an expanding manufacturing sector with sequestration having a negative impact on the defense industry.
The Fed’s Beige Book is not a numeral indicator, but rather a combination of twelve reports from each of the Fed districts. Released eight times a year, the report represents the Fed’s consensus on different districts and sectors of the economy in addition to discussing the labor markets and overall price levels. This is an official report from the central bank that binds data and market expectations into a clear outlook for the pace and need for further stimulus – particularly keeping pace of the $85 billion-per-month stimulus program.
After an already strong day for the greenback, the dollar remained relatively unchanged following the report. From the risk appetite perspective, this steady assessment of the world’s largest economy wouldn’t stir hopes of avoiding the inevitable stimulus reductions by the Fed. Subsequently, the S&P 500’s tumble to a one month low this morning found little relief.
Written by Gregory Marks, DailyFX Research Team
Written by John Kicklighter, Chief Strategist for DailyFX.com
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