Before the ISM data was released, hopes of a Fed rate hike had been already reduced by a poor August non-farm payroll in the US released september 2.
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Fundamental economic indicators like the labour market, wages and inflation are sending the Federal Reserve mixed signals, making it hard for policymakers to make rate decisions, says Benjamin Tal, deputy chief economist of CIBC World Markets.
World shares saw their biggest jump in over a month on Monday and the dollar slipped, after weaker-than-expected United States jobs figures gave investors another excuse to push back Federal Reserve interest rate rise expectations.
The euro maintained Tuesday’s 0.96 per cent rise against the dollar, the biggest daily gain in three months on Tuesday and last stood at US$1.1247.
According to the August ADP National Employment Report released on Wednesday, U.S. private sector employment increased by 177,000 jobs from July to August, above the market consensus of 175,000.
The Bank of England is set to convene on September 15 to decide rates and we do not expect major action from the central bank as its is likely to take its cues from the Fed a week later. The Nasdaq Composite Index climbed to a record high. Similarly, monetary policy also has been sensitive towards the jobs report as in all the FOMC meetings this year, chairperson Janet Yellen’s decision on a rate hike has primarily been driven by the labor market conditions.
In afternoon trade the dollar eased back as dealers digested the thought of rates staying low for the time being. The price of the 0.75 percent security due in August 2018 was 99 29/32. But the US currency was later caught in a narrow range mostly around ¥101.40, before attracting moderate buybacks from European players in late hours.
Bonds had a seesaw day to close the week, as “perma-hawk” president of the Richmond Fed Jeffrey Lacker gave an aggressive speech asserting that the Fed was way behind in its interest rate policy.
Hong Kong: Asian stock markets rallied Monday and the dollar dipped as a slowdown in USA jobs creation doused expectations for an interest rate hike this month while at the same time showing the world’s top economy was still improving.
Bond traders are showing their doubts about the possibility of an interest-rate hike by the Federal Reserve this month after a report showed that USA service industries expanded at the slowest pace in six years.
In Asia, MSCI’s main Asia-Pacific stock index, excluding Japan was up 0.2 per cent, having earlier touched its highest since July a year ago.
The dollar index, which measures the greenback against a basket of major currencies was flat.
Federal Reserve vice-chair Stanley Fischer has said that the US labour market is close to being fully employed. It rose $1.28 to $44.44 late last week.
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Brent crude, the global benchmark, gained 52 cents to $47.78 a barrel.
