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Dollar Recovering Some Ground After Fed Announcement

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The dollar got off to a weak start Wednesday, but has recovered some its lost ground in the afternoon. As expected, the Federal Reserve on Wednesday voted to leave its benchmark interest rate unchanged. The accompanying statement also hinted that the Fed will increase the benchmark rate at its next meeting, in late March, thanks to an improving economy and signs of inflation.

"Information received since the Federal Open Market Committee met in December indicates that the labor market has continued to strengthen and that economic activity has been rising at a solid rate," the statement read.

"Gains in employment, household spending, and business fixed investment have been solid, and the unemployment rate has stayed low."

The Fed said it expects inflation to "move up" in 2018, setting the table for one of three rate hikes projected by year's end.

Private sector employment in the U.S. increased by much more than anticipated in the month of January, according to a report released by payroll processor ADP on Wednesday. ADP said employment in the private sector spiked by 234,000 jobs in January after surging up by a revised 242,000 jobs in December.

Economists had expected an increase of about 185,000 jobs compared to the jump of 250,000 jobs originally reported for the previous month.

While MNI Indicators released a report on Wednesday showing a slowdown in growth in Chicago-area business activity in the month of January, the pace of growth slowed by less than anticipated.

MNI Indicators said its Chicago business barometer dropped to 65.7 in January from an upwardly revised 67.8 in December, although a reading above 50 still indicates growth. Economists had expected the barometer to fall to 64.0.

A report released by the National Association of Realtors on Wednesday showed pending home sales in the U.S. increased for the third consecutive month in December.

NAR said its pending home sales index climbed by 0.5 percent to 110.1 in December after rising by 0.3 percent to an upwardly revised 109.6 in November. Economists had expected the index to increase by 0.4 percent.

The dollar fell to a low of $1.2474 against the Euro Wednesday, but has since rebounded to around $1.2390.

Eurozone inflation slowed as expected on lower energy prices at the start of the year, giving more time for the central bank to start tightening. Headline inflation came in at 1.3 percent in January, in line with expectations, but weaker than December's 1.4 percent, flash data from Eurostat revealed Wednesday.

The euro area unemployment rate held steady at the lowest level in 8 years in December, Eurostat reported Wednesday. The jobless rate remained stable at seasonally adjusted 8.7 percent, the lowest since January 2009.

Germany's retail sales declined unexpectedly in December, data from Destatis revealed Wednesday. Retail sales fell 1.9 percent year-on-year in December, in contrast to November's 4.3 percent increase.

This was the biggest fall since November 2014, when sales declined 2.1 percent. The decline confounded economists' expectations of 2.8 percent increase.

Germany's unemployment rate dropped marginally in December, data from Destatis showed Wednesday. The jobless rate fell slightly to adjusted 3.6 percent from 3.7 percent in November. Meanwhile, on an unadjusted basis, the unemployment rate rose to 3.5 percent from 3.4 percent a month ago.

Germany's unemployment rate declined in January, the Federal Labor Agency reportedly said Wednesday. The unemployment rate dropped to a record low of 5.4 percent in January, as expected.

France inflation increased in January on higher services and energy cost, the provisional estimate from the statistical office Insee showed Wednesday. Consumer price inflation rose to 1.4 percent in January from 1.2 percent in the previous month. The rate was expected to remain at 1.2 percent.

The buck slipped to a low of $1.4232 against the pound sterling Wednesday, but has since bounced back to around $1.4165.

Consumer confidence in the United Kingdom showed mild improvement in January, the latest survey from GfK revealed on Wednesday with an index score of -9. That beat expectations for -13, which would have been unchanged from the December reading.

The greenback dipped to an early low of Y108.604 against the Japanese Yen this morning, but has since climbed to around Y109.290.

Industrial output in Japan advanced a seasonally adjusted 2.7 percent on month in December, the Ministry of Economy, Trade and Industry said in Wednesday's preliminary reading. That beat expectations for an increase of 1.5 percent following the 0.5 percent gain in November.

Japan's consumer confidence held steady at the start of the year, survey data from the Cabinet Office showed Wednesday. The seasonally adjusted consumer confidence index came in at 44.7 in January, the same reading as in December. Economists had expected the index to rise to 44.9.

Japan's housing starts declined for the sixth successive month in December, defying economists' forecast for an increase, data from the Ministry of Land, Infrastructure, Transport and Tourism showed Wednesday.

Housing starts dropped 2.1 percent year-over-year in December, faster than the 0.4 percent fall in November. Meanwhile, economists had expected a 1.1 percent rise for the month.

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