Fed Vice Chairman Stanley Fischer, in an interview with Bloomberg TV on Tuesday, said the USA job market is close to full strength and the pace of interest rate hikes will depend on how well the economy is doing. The market sold-off on Friday after Fischer suggested there may be as many as two rate hikes before the end of the year.
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Market views on the timing of the next US rate hike took a sharp turn after the Federal Reserve’s annual symposium in Jackson Hole, Wyoming, this past weekend. The December futures contract settled up 11 cents or 0.6% at $18.86 a troy ounce.
The U.S Economy is expected to add 180 000 additional jobs in August slightly below the year-to-date average which stands at 186K.
“And should the Fed really hike interest rates two more times this year as Fischer considers possible, considerably more dollar strength would have to be expected”.
Among top losers, Air Liquide, Carrefour, LafargeHolcim and Peugeot dropped over 1 percent each.
The implied probability that the US Fed will hike interest rates in September had fallen back to 36 percent. The London Stock Exchange was closed for a summer bank holiday. Spot gold was down 0.2 percent at $1,320.33 an ounce at 1149 GMT, while US gold futures for December delivery were down $3.7 an ounce at $1,323.40.
Fischer said his photo at Jackson Hole with Fed Chairwoman Yellen and New York Fed President William Dudley was created to show unity among the leadership at the central bank.
The dollar continued it climb at the start of the week as the follow through from Janet Yellen’s Friday speech helped lift the USD/JPY through the 102.00 figure in Asian and early European trade.
“A much stronger USA dollar is causing selling pressure today”, said Carsten Fritsch of Commerzbank.
In a much-scrutinized speech, Fed chief Janet Yellen on Friday hinted at a U.S. interest rate rise by the end of the year. Hong Kong’s Hang Seng rose 0.9 percent to 23,028.02, while the Shanghai Composite inched up 0.2 percent to 3,074.68.
But she did not give a clear signal on the timing of a possible increase, leaving markets in limbo again over when the USA central bank would move, analysts said. But he also stressed that the speech of the president of the EDF, reaffirming his desire to normalize very gradual USA monetary policy could already stop the fall of the dollar, and the rising prices of risky assets occurred during summer.
Higher interest rates are generally viewed as bad news for non-yielding precious metals, as a less accommodative policy environment tends to support the USA dollar.
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Europe’s broad FTSEurofirst 300 index .fteu3 was last down 0.19 percent, at 1,350.13. The International benchmark Brent futures rose 0.75 percent to $49.80 and West Texas Intermediate (WTI) jumped 0.96 percent to $47.43 by 09:30 GMT.
