On Friday, the greenback edged down to leave a slight movement on the week, with investors concentrated on a speech later the day by the chair of the Federal Reserve, that may give clarity on whether USA interest rates will increase or not this year.
Advertisement
U.S. wages growth is forecast to remain around to 2.6% year on year – and all this should be enough to keep the September Fed meeting “in play” for a hike, but not enough to make it probable.
The Fed next meets September 20-21 just hours after the Bank of Japan announces the results of its comprehensive review and decides policy, with Bank of Japan Governor Haruhiko Kuroda saying the review wouldn’t lead to a shrinking of policy. The Australian dollar slumped against the greenback on Friday as investors grappled with the possible timing of an interest rate hike after comments from several Federal Reserve officials, including Chair Janet Yellen.
“If we had a lot of good news and we got into the September meeting and other people wanted to go, I could support that – but again I’m talking about one increase and no planned increases after that”, he told The Wall Street Journal. Investors will note that the yellow metal touched a 4-week low of $1,317.46 on Thursday. We kick off this morning with revised second quarter GDP data from the United Kingdom and France, with both facing a tough time right now for very different reasons. I’m sure she will be very careful not to overpromise but we’ve seen in the past that she isn’t entirely averse to dropping clear hints, as she did ahead of the last rate hike eight months ago.
The reality is this is simply more of the same from a data driven fed awaiting confirmation from the markets they monitor.
Those comments were roughly in line with the views expressed by Fed policymakers including Vice Chair Stanley Fischer earlier in the week, adding to expectations that Yellen’s comments would be in a similar vein.
United States stocks initially rose on the back of Fed chair Janet Yellen’s more upbeat assessment of the economy, before ending Friday’s session lower as rate hike expectations moved higher.
European stocks closed higher, with a late boost from Yellen’s remarks.
Implied probability in futures markets of 32 per cent is double what it was two weeks ago, and up from zero after the United Kingdom voted to exit the European Union in June.
UK’s benchmark FTSE 100 closed up 1 percent, the pan-European FTSEurofirst 300 ended the day up by 0.6 percent, Germany’s DAX ended up by 0.6 percent, France’s CAC finished the day up by 0.9 percent.
The Dow Jones industrial average fell 53 points, or 0.3%, to 18,395.
Noting that real growth in the U.S. gross domestic product over the past year is estimated at only 1.0 percent to 1.25 percent, he focused on the role of what he called “exceptionally low productivity growth”.
The market reaction following the speech was initially negative but soon reversed as no new initiatives or direction was seen.
Janet Yellen holds a press conference following the two-day Federal Open Market Committee (FOMC) policy meeting in Washington March 16, 2016.
Advertisement
The S&P 500 posted 29 new 52-week highs and one new low; the Nasdaq Composite recorded 108 new highs and 23 new lows.
