Market Review - 08/11/2018 23:53 GMT
Dollar catches a bid after Fed's hawkish hold, keeping alive prospect for December's rate hike
The greenback regain traction in New York trading on Thursday after the Fed kept rates unchanged as widely expected, however, traders bought usd broadly after its accompanied statement said strong jobs and spending kept the economy on track, setting the satge for a another rate hike at its last FOMC meeting in December.
Reuters reported the U.S. Federal Reserve held interest rates steady on Thursday but remained on track to keep gradually tightening borrowing costs, as it pointed to a healthy economy that was marred only by a dip in the growth of business investment.
Business investment can be a key to rising productivity and future growth, and the fact that it had "moderated from its rapid pace," as the Fed said, was the only cautionary note in a policy statement that touted strong job gains and household spending, and a "strong rate" of overall economic activity.
"The labor market has continued to strengthen and ... economic activity has been rising at a strong rate," the U.S. central bank said, leaving intact its plans to continue raising rates at a gradual pace. The Fed has hiked rates three times this year and is widely expected to do so again in December.
The statement overall reflected little change in the Fed's outlook for the economy since its last policy meeting in September. Inflation remained near its 2 percent target, unemployment fell, and risks to the economic outlook were still felt to be "roughly balanced."
The Fed's policy statement did not explicitly take stock of the recent volatility in U.S. equity markets that led to the selloff in October, or address the possibility of a slowdown in global growth next year.
The Fed's policy decision was unanimous.
Versus the Japanese, dollar traded with a firm bias in Asia and rose to 113.73 in Asia n despite retreating to 113.58 ahead of European open, renewed buying lifted price to 113.75, then ratcheted higher to 113.90 in New York on broad-based usd's strength and strong rebound in U.S. Treasury yields. The pair later climbed to a fresh one-month high of 114.09 on broad-based usd's strength in post-FOMC trading.
The single currency went through a roller-coaster ride. Although price moved sideways in Asia and briefly fell to 1.1413 at European open, price swiftly rose to 1.1445 on easing U.S.-China trade tension before falling to 1.1404 after European Commission cut Italy's growth forecast, however, the pair rallied to session highs high of 1.1447 in New York after ECB's Draghi's comments. The pair later erased intra-day gain and tumbled to 1.1352 in post-FOMC after Fed's hwakish hold.
Reuters reported the European Commission forecast on Thursday the Italian economy would grow more slowly in the next two years than Rome thinks, making government budget deficits much higher than assumed by Italy while public debt would be stable rather than decline.
Reuters reported European Central Bank President Mario Draghi downplayed a recent string is weak economic data, arguing on Thursday that the euro zone's broad-based expansion is set to continue.
Draghi also reaffirmed the ECB's plans to wind down bond purchases, also known as quantitative easing, by the close of the year and to keep rates at a record low at least through next summer.
The British pound went through a volatile session. Cable traded narrowly in Asia and fell in tandem with euro to 1.3099 at European open then rose to session highs at 1.3150 as trade tension between U.S. and China eased before falling to 1.3109. Despite a brief rebound to 1.3140 on news that a Brexit deal could be reached soon, price fell to to 1.3087 ahead of U.S. open on British Foreign Minister Jeremy Hunt's comments together with dollar's strength. Cable recovered to 1.3130 on positive Brexit news that an EU summit could be held in late November before tumbing to 1.3046 in post-FOMC New York.
Reuters reported London and Brussels could reach a deal on Britain's looming departure from the European Union in the coming days, Austrian newspaper Der Standard on Thursday cited European Commission sources as saying.
Reuters reported British Foreign Minister Jeremy Hunt on Thursday said it was "probably pushing it" to expect a Brexit deal within the next seven days.
Reuters reported the United Kingdom's Brexit deal with the European Union will be published on Tuesday after the cabinet reviews the deal on Monday, according to a draft timetable being discussed in London, the deputy political editor for The Times said.
Prime Minister Theresa May will make a statement to the lower house of the British parliament, the House of Commons on Wednesday, Coates said. An EU summit could be held around Nov 23-25, Coates said.
In other news, Bloomberg reported Italy said to be not planning any change to budget for now.
Reuters reported the Chinese government's top diplomat Wang Yi said on Thursday that China and the United States can and should appropriately resolve their trade dispute through talks.
On the data front, U.S. initial claims for state unemployment benefits dropped by 1,000 to a seasonally adjusted 214,000 for the week ended Nov. 3, the Labor Department said on Thursday. Data for the prior week was revised to show 215,000 claims received, which was 1,000 more than previously reported.
The weekly claims were in line with predictions of economists polled by Reuters, who had forecast 214,000 people would file for benefits.
Data to be released on Friday :
China PPI, CPI, France industrial output, UK GDP, industrial output, manufacturing output, construction output, trad balance, NIESR GDP estimate, and U.S. PPI, University of Michigan sentiment, wholesale inventories, wholesale sales.
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