Monday, August 3, 2015

Dollar rises as Fed keeps interest rates on hold

Dollar rises as Fed keeps interest rates on hold

It is imperative to state that the unemployment rate has reached a seven year low of 5.3 percent which is being seen as a huge positive.

“They haven’t made up their minds, but… we’re getting that much closer to satisfying their criteria” for a rate hike, Hanson said.
But Baumohl says not to bet the farm that we’ll see any rate hike at the next meeting, because so many people have been anticipating an increase for the past year.
Although the September meeting, when Yellen is set to hold a news conference, is seen as the most likely time for a rate increase, some analysts think the Fed might wait until December.

The addition of a single word “some” in the sentence below is the strongest indication we are indeed creeping closer to a rate hike”,
Alan Ruskin, global head of Group of 10 foreign exchange at Deutsche Bank AG, said in an e-mail.
In determining how long to maintain this target range, the Committee will assess progress-both realized and expected toward its objectives of maximum employment and 2 percent inflation.
Gold fell more than 1 percent to near its weakest level since early 2010 on Thursday, as the dollar jumped ahead of US economic data that is likely to strengthen expectations for an interest rate hike by the Federal Reserve in September. Though the rate-setting committee has not raised rates, as expected by the markets, it, nevertheless, dropped some hints that the rate hike is not far away.
Chris Williamson, chief economist at Markit, said: “The improving job market, alongside the boon to households from low inflation and falling oil prices, has been key to the economy’s ability to sustain strong growth”. He believes a rate hike is still possible in September, but he said the odds are not as good following Wednesday’s statement. Treasury prices were largely unchanged after the Fed statement. U.S. The Fed still expects inflation to rise gradually toward its 2 percent target. The first-quarter figure was revised to a gain of 0.6 percent from a previously reported contraction.
At the same time, inflation has lingered below the Fed’s goal for three years, with the central bank’s preferred gauge rising just 0.2 percent in May from a year earlier.
Brent settled down 7 cents, or 0.1 percent, at $53.31 a barrel, while U.S. crude closed lower by 27 cents, or 0.6 percent, at $48.52. So they do not expect the monthly payroll numbers to shock on the downside.
“Economic activity has been expanding moderately in recent months”, it said in a statement.
“The most important thing the Fed is trying to communicate is not the timing of the first liftoff, but the pace, and continuing to try to counsel the markets about the pace being gradual”, said Roger Bayston, senior vice president and director of fixed income at the Franklin Templeton fixed-income group in San Mateo, California.

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