EUR/USD opened sharply higher today as Treasury Secretary Lawrence Summers said that he is no longer a candidate to replace Ben Bernanke as the Federal Reserve Chairman. The remaining candidate, Fed Vice Chairman Janet Yellen, is much more dovish than Summers, leading to speculations that Fed’s monetary policy will remain extremely accommodative for a long time. Today’s data did not support the case for stimulus reduction, as the New York manufacturing index unexpectedly fell.
NY Empire State Index dropped from 8.2 in August to 6.3 in September. It was an unpleasant surprise to market participants who have expected an increase to 9.2. (Event A on the chart.)
Industrial production advanced 0.4% in August (somewhat below the forecast of 0.5%) after showing no change in July. Capacity utilization increased 0.2 percentage point to 77.8% in August, in line with expectations. (Event B on the chart.)
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