US Dollar Climbing After Yellen Says December Rate Hike Still Possible
Washington (Nov 4) The dollar is gaining ground against all of its major rivals Wednesday afternoon, after comments from Federal Reserve Chair Janet Yellen . While speaking before the House Financial Services panel, Yellen stated that a December rate hike remains a possibility.
"If the incoming information supports that expectation, then or statement indicates that December would be a live possibility," she said.
"Now no decision has been made on that and, what it will depend on, is the [ Federal Open Market Committee's ] assessment at the time. That assessment will be informed by all of the data that we collect between now and (the December meeting)."
Yellen assured lawmakers that the Federal Reserve will raise interest rates gradually once it begins to tighten monetary policy.
When asked about whether raising rates will hurt home buying demand, Yellen insisted that slow, modest increases will not derail the recovery in the US housing market.
Private sector employment in the US increased roughly in line with economist estimates in the month of October, according to a report released by payroll processor ADP on Wednesday. The report said the private sector added 182,000 jobs in October following a downwardly revised increase of 190,000 jobs in September.
Economists had expected private sector employment to climb by about 180,000 jobs compared to the addition of 200,000 jobs originally reported for the previous month.
Reflecting an increase in exports and a decrease in imports, the Commerce Department released a report on Wednesday showing that the US trade deficit narrowed more than expected in the month of September.
The report said the trade deficit narrowed to USD40.8 billion in September from a revised USD48.0 billion in August. The deficit was the smallest since coming in at USD38.5 billion in February. Economists had expected the deficit to narrow to USD41.1 billion from the USD48.3 billion originally reported for the previous month.
Activity in the US service sector unexpectedly grew at a faster rate in the month of October, according to a report released by the Institute for Supply Management on Wednesday. The ISM said its non-manufacturing index climbed to 59.1 in October from 56.9 in September, with a reading above 50 indicating growth in the service sector.
While the Federal Reserve is still considering an interest rate hike, the European Central Bank is considering further stimulus measures. ECB President Mario Draghi reiterated the dovish comments he made in October at a cultural event in Frankfurt today.
The dollar has surged to a 3-month high of USD1.0855 against the Euro Wednesday afternoon, from around USD1.0950 this morning.
Eurozone producer prices in September declined at the fastest annual pace since the start of the year, preliminary data from Eurostat showed Wednesday. The producer price index for the domestic market dropped 3.1% year-on-year following a 2.6% decline in August. Economists had expected a 3.3% decrease.
Eurozone's private sector economy expanded slightly less than initially estimated in October, final data from Markit showed Wednesday. The final composite output index came in at 53.9 in October, marginally below the flash score of 54 but above September's 53.6.
Germany's private sector expanded marginally in October but the latest pace of growth was slower than initially estimated, final data from Markit showed Wednesday. The final composite Purchasing Managers' Index rose marginally to 54.2 from 54.1 in September. It was below the flash score of 54.5.
The French private sector grew at the fastest pace in four months in October and exceeded initial growth estimate, final data from Markit showed Wednesday. The composite Purchasing Managers' Index rose to 52.6, a four-month high, from 51.9 in September. The flash reading was 52.3.
The National Institute of Economic and Social Research lowered its UK growth projections and expects the Bank of England to raise interest rates at the start of next year.
The think tank downgraded growth forecast for this year to 2.4% from 2.5% and that for next year to 2.3% from 2.4%. For 2017, it estimated 2.6% expansion.
The institute said the BoE is likely to lift interest rates at the start of 2016 and then gradually by 50 basis points a year, reaching 2% by the end of 2018.
The buck hovered around the USD1.5420 level against the pound sterling this morning, but has risen to around USD1.5360 this afternoon.
The UK service sector growth strengthened for the first time in four months in October and exceeded expectations, underpinned by the rise in business activity and job creation, survey results from Markit Economics showed Wednesday.
The Chartered Institute of Procurement & Supply/Markit services Purchasing Managers' Index rose more-than-expected to 54.9 in October from 53.3 in September. It was forecast to rise to 54.5.
Shop prices in the UK were down 1.8% on year in October, the British Retail Consortium and Nielsen said on Wednesday, following the 1.9% contraction in September.
The greenback has broken out to over a 2-month high of Y121.622 against the Japanese Yen this afternoon, from around Y121.300 in early trade.
The services sector in Japan continued to expand in October, and at an accelerated pace, the latest survey from Nikkei showed on Wednesday with a PMI score of 52.2. That's up from 51.4 in September, and it moves further above the boom-or-bust line of 50 that separates expansion from contraction.
Japan's consumer confidence improved more-than-expected in October, after falling in the prior month, survey data from the Cabinet Office showed Wednesday. The seasonally adjusted consumer confidence index rose to 41.5 in October from 40.6 in September. Economists had expected the index to increase slightly to 40.8.