Fed May Use U.S. Data as an Excuse to Delay Normalizing Monetary Policy

U.S. economic data continues to conflict, indicating that the U.S. economic recovery is going to continue to experience slow going. This morning, consumer price data showed a drop in April, as retailers respond to weak demand with a high employment rate and continued housing market woes.

As a result, it is likely that the Fed will delay raising interest rates, keeping from normalizing monetary policy. GFT's Kathy Lien explains in FX360 what the Fed is likely to do:

The lack of inflation is not surprising considering that global demand remains weak.  There is a good chance that the problems in Europe and the continual decline in oil prices has pushed PPI even lower.  For the Federal Reserve, this is a good excuse to delay the normalization of monetary policy until the situation in Europe stabilizes because America is not immune to contagion. 

Today, the euro appears to be gaining a little bit against the U.S. dollar as the euro zone outlook improves and Germany attempts to help shore up the euro by banning naked short selling.