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.

Source: AllianceNews