It looks to be picking up from data we monitor.
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Speaking at Harvard University yesterday, Janet Yellen, the Fed chair, became the latest policymaker to point to improving economic conditions in the United States as laying the case for a potential rate rise.
The dollar index was trading around two-month highs, adding 0.3 per cent to 95.826.
She said indicators point to the US economy rebounding after a hard first quarter.
The euro wallowed around 2-1/2 month lows, edging down 0.1 per cent to $1.1104.
“The prospect of higher US interest rates will, in due course, test both the global markets and China’s policy to manage its currency”, said Jade Fu, investment manager at Heartwood Investment Management.
The flurry of Fed speakers, the continued solid reports on the U.S.jobs market, and the timing of the Fed’s meeting schedule has many analysts now expecting a July hike.
Bets on a rate increase at the July 26-27 policy meeting edged up to 60 per cent, more than double the estimate from a month ago. With the U.S. poised to raise interest rates and pressure building on China to ease monetary policy, cash outflows will accelerate, said Song Yu, China economist for Goldman Sachs/Gao Hua Securities Co.in Beijing.
“If we were to raise interest rates too steeply and we were to trigger a downturn or contribute to a downturn, we have limited scope for responding, and it is an important reason for caution”, she said. On Friday, Macroeconomic Advisers, a forecasting firm forecasted 2.5 percent growth in gross domestic product at an annual rate in the second quarter compared to 0.8 percent in the first. He said the Fed will refrain from raising interest rates in June unless traders in the futures market assign odds of at least 50 percent to the move.
The US dollar pushed higher in reaction, but share markets showed little impact.
In the NY session, the German flash CPI data for May, Canada industrial products and raw materials price indexes for April are slated for release.
“But I think k the risk of financial market volatility…is clearly there because there is no doubt that Fed rate expectations were part of that equation driving higher financial market volatility”.
TOKYO – Asian shares slipped on Monday while the dollar marked fresh highs after Federal Reserve chairwoman Janet Yellen suggested that an interest rate hike could be around the corner. US markets are closed Monday.
The FOMC last met in April but declined to raise the benchmark rate, largely because US inflation remained below the bank’s target threshold of 2 percent.
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The one downside Yellen highlighted for the USA economy is the nation’s productivity, which has average about 0.5% a year within the last five years.
