USA consumer spending increased for a fourth straight month in July amid strong demand for automobiles, pointing to a pickup in economic growth that could pave the way for the Fed to raise interest rates this year.
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The dollar index .dxy continued to trade at a more than two-week high on higher prospects of a rate increase. The data, which beat economists’ expectations for a dip to 97.0 according to a Reuters poll, stoked expectations that the Fed could raise rates this year after top Fed officials have said recently that such a move was possible.
She made it clear that the case for an interest rates hike had been reinforced in recent months as the economy and the labour market had posted encouraging figures.
Against the low-yielding yen, the dollar rose 0.5 percent to 102.38 yen, having climbed to 102.45 yen its highest since August 9 earlier in the day.
Japan’s benchmark Nikkei 225 added 2.2 per cent to 16,719.31 in early trading.
The commodities-related European oil and gas and basic resources sectors were the only ones in negative territory, down 0.2 percent and 2.1 percent respectively.
In late NY trading on Monday, the euro rose to $1.1190 from $1.1185 of the previous session, and the British pound decreased to $1.3114 from $1.3127, Xinhua news agency reported. That followed gains of 1.3 per cent on Friday, its biggest one-day advance in nearly seven weeks.
Europe’s broad FTSEurofirst 300 index was last down 0.19 per cent, at 1,350.13. However, we do not expect the Fed to signal or embark on a series of rate hikes, which should limit the extent to which USA real yields can recover from current low levels.
Oil prices fell for a second straight day in response to the dollar’s strength and worries about crude oversupply.
Gold futures slipped to a one-month low Monday morning in the USA amid pressure from a surging dollar, which was ignited by last week’s Federal Reserve meeting in Wyoming.
U.S. Treasury yields were little changed as traders awaited the U.S.jobs data.
Spot gold was down 0.3 percent at $1,319.47 an ounce at 0931 GMT, while US gold futures for December delivery were down $4.50 an ounce at $1,322.50.
Gold has a strong downside obstacle at $1,304 and an inability to break it may see a relief rally, said Hareesh V, research head at Geofin Comtrade Ltd.
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“It is looking more likely that we will see a rate hike this year, and September is a good possibility”, said Richard Sichel, chief investment officer of Philadelphia Trust Co in Philadelphia.
