Headlines: Dollar rebounded as U.S. economy expanded faster than expected
Main news:
- More GDP data ahead today
- Crude oil rose above $62 a barrel after U.S. stockpiles dropped
Forex outlook:
The dollar rebounded on Wednesday, advanced the most in three weeks against the euro after the U.S. third quarter GDP report showed U.S. economic growth last quarter was faster than previously estimated. The report increased expectations the Fed will keep interest rates on hold for a longer period. The dollar rose 0.4 percent to $1.3145 per euro from $1.3218 earlier on Wednesday. U.S. gross domestic product expanded at a 2.2 annual rate last quarter against 1.8 percent expectation. As well as the beige book has showed most Fed districted reported “moderate growth” the past two months. The dollar pared gains against the euro briefly after a report showed sales of new homes in the U.S. fell 3.2 percent in October to 1.004 million, but it failed to have any lasting impact on currency trading.
The yen rebounded from a record low of 153.43 against the euro to 152.86 after a government report showed Japan's industrial production rose in October, prompting investors to increase bets the Bank of Japan will raise interest rates. Factory output gained 1.6 percent from a month ago to a record. BOJ Governor Toshihiko Fukui today said policy makers need to ensure economic growth and prices are stable.
Sterling climbed for a ninth consecutive day, its longest winning run against the dollar in more than four years, on speculation the Bank of England will keep lifting interest rates into next year. The pound rose to $1.9545, the highest in almost two years against the dollar. Investors are expecting the pound to hit $2 over the next four to six weeks as a lot of them are now chasing this position.
The third quarter GDP data in the euro zone will be released today may persuades the ECB to raise interest rates in an attempt to control growth. Moreover, GDP data from Canada and Switzerland is due today which will give investors some better view on the economic growth of these two countries.
Gold: Gold fell for a second day after a report showed the U.S. economy grew more than expected, boosting the dollar and erode the metal’s appeal as an alternative investment. Investors have seen fairly bullish in gold market although there was a bit of drifting. In addition, investors are keeping close watch on the energy market as any breakthrough is going to be supportive for gold.
Crude Oil: Crude oil rose 2.4 percent to $62.45 a barrel, the highest in two months, after a report showed U.S. heating oil inventories fell and below-normal temperatures moved towards the eastern U.S. Crude oil inventories also fell 300,000 barrels last week more than expected of 100,000 barrels decrease. As crude oil climbed above $60, in the OPEC’s comfortable zone, further production cut by the OPEC is too early to decide.
