- Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd.
The most traded currency pair is trading above 1.36 level again, as the Federal Reserve proceeded with the tapering of its quantitative easing programme. Meanwhile, initial jobless claims fell 6,000 to 312,000 in the week ended June 14, with the indicator stabilizing around 300,000. The labour market is healing, with firings skirting to pre-recession lows, while companies are hiring more workers as they look for a sustained pickup in household spending. Thus, payrolls are heading towards its best growth since 1999. The less volatile four-week moving average inched lower to 311,750. Nonetheless, jobless claims report has a muted impact on markets already, as the dovish Fed provoked a massive sell-off of the U.S. Dollar.
Despite less confident statement from policymakers, there were signs they can take a pause this month and not taper its stimulus programme further. Moreover, the Fed should be more concerned about inflation, as consumer prices picked up only 0.4% last month. Economists from the UBS pointed out the Fed should revise its inflation target, saying there is no harm with inflation rate at 2.5%. They also claimed that higher inflation will be welcomed by Obama's administration, the Fed and American households.
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