The Fed, US Data an German CPI

With yesterdays Fed release removing the line that ‘global developments may restrain growth’ saw market participants shift the probability of a hike before the end of 2015 to 45% from the previous 35% seeing EUR/USD take another leg lower. However, as todays annualised GDP slowed sharply from 3.9% to 1.5% as companies expanded stockpiles at a slower pace and exports slowed (due to the stronger dollar). This waning is inventory build will be a bi product of companies pre-empting slowing exports due to dollar strength. Furthermore, the inflation components (GDP price index and Core PCE QoQ) remain muted. Thus, even as consumption remained robust the Fed will not be able to ignore the strains on exports and the below target inflation components. Furthermore, with recent European PMIs stabilising and preliminary German CPI coming in at 0.2% YoY (above market consensus) I anticipate Draghi will hold fire and the Fed will not move till 2016.