“Yellen reiterated the key policy message from the October (Federal Open Market Committee) statement, namely that a December liftoff was likely as long as the data remained on track”, he said. Traders had mostly priced out a 2015 increase, only to ramp up those bets after policy makers said in their October policy meeting that they’d assess whether to boost borrowing costs in December.
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The Fed chairwoman said that she and her committee expect the USA economy to grow “at a pace that’s sufficient to generate further improvement in the labor market, and to return inflation to our 2 percent target”.
But by delaying interest-rate hikes for months, the Federal Reserve has created uncertainty that gives businesses an excuse not to invest in capital projects, Malpass said.
The economic outlook was further brightened by another report on Wednesday showing the trade deficit hit a seven-month low in September as exports rebounded, a tentative sign the worst of the drag from the stronger dollar may be over.
The figure means the job growth in the past three months has averaged 187,000 per month, slower than the 210,000 in the first half of the year but it beat expectations of 180,000. “The main driver behind the down move is that more market participants now believe that the Fed will begin raising rates this year”, Commerzbank analyst Daniel Briesemann said.
The U.S. dollar index surged to a three-month high of 98.06 on Wednesday. An upbeat release of NFP data tomorrow will add to the current expectation of an interest rate hike this year, as early as December FOMC meeting, putting pressure on bullions.
Sentiment was dampened by the drop in oil prices and comments from Federal Reserve officials, including Fed Chair Yellen justifying a December rate hike.
Friday’s nonfarm payrolls report is expected to show a gain of 177,000 jobs with unemployment holding at 5.1%, according to forecasts from economists polled.
An hour into USA trading, spot gold was US$1 lower at US$1,106, silver eased below US$15 at US$14.95 while platinum shed US$2 to US$950.
Eleven participants said their conviction around a December hike has increased in the last month.
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The ADP non-farm employment change – a precursor to the official jobs report – saw 182,000 jobs added, near estimates of 183,000, while the final services PMI for October was 54.8, a touch above the 54.6 consensus.
