Comments over the weekend from major central bank figures have set the tempo for market behavior for the day and for the week. Federal Reserve Vice Chair Stanley Fischer added fuel to the rate hike fire by noting that under the current economic expansion, the US labor market has posted strong gains that are close to the bank’s goals of maximum employment and price stability.
Speaking at the Aspen Institute Conference in Colorado, Fischer said, “Employment has increased impressively over the past six years since its low point in early 2010 and the unemployment rate has hovered near 5% since August of last year, close to most estimates of the full-employment rate of unemployment”. While noting that the economy has performed less admirably in reaching the Fed's explicit 2% inflation target, he affirmed that core PCE (personal consumption expenditure) inflation, at 1.6% in June, "is within hailing distance of 2% -- and the core consumer price index inflation rate is currently above 2%."
With Fischer, a permanent voter on the rate hike, the market had these comments in mind when the Asian session opened on Monday, which led to the Australian dollar (AUD) and Japanese yen (JPY) losing against the US dollar (USD). The Japanese yen tanked even further as the Bank of Japan Governor Kuroda suggested that there is room for further easing. Kuroda also stated that the bank will consider making changes to the 80 trillion yen ($798 billion) massive annual asset-purchase plan as early as September, once a review is undertaken.
On a light data day, with only the medium impact month on month Canadian wholesale sales to be released today, the comments by Kuroda and Fischer will drive sentiment in the market.
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