Dollar Recovers After Early Weakness, Gains Against Major Rivals

Trading 21 août 2019 Commentaire »

The U.S. dollar recovered after a weak start on Wednesday, and edged further up after the release of the minutes of the Federal Reserve's July meeting.

The minutes showed the central bank intends to remain flexible with regard to future changes to interest rates, citing a lack of clarity about resolution of the risks to the U.S. economy.

The dollar index, which dropped to a low of 97.95 at one stage, rallied to 98.33 in late afternoon trades and was last seen at 98.30, up 0.11% from previous close.

Against the euro, the greenback was up 0.1% at 1.1087, after having weakened to 1.109 earlier in the day.

The pound sterling was weak against the dollar, with a unit of sterling fetching $1.2125, down from $1.2169 on Tuesday.

The safe haven Japanese Yen was weak as well against the greenback with the unit of the later fetching 106.60 yen. The yen had closed at 106.23 a dollar on Tuesday.

The dollar gained nearly 0.25% against the loonie at 1.3288, and about 0.5% against Swiss franc at 0.9829.

Data released this morning showed the annual inflation rate in Canada was at 2% in July 2019, unchanged from the previous month and above market expectations of 1.7%.

Month-on-month, inflation was up 0.5% in July. Core consumer price inflation for July came in at 2%.

Against the Aussie, the dollar was down slightly with the AUD-USD pair trading at 0.6780.

The minutes of the Federal Open Market Committee meeting held in late July showed members intend to pay close attention to the implications of incoming data for the economic outlook.

The decision to lower rates came even though participants generally judged that downside risks to the outlook for economic activity had diminished somewhat since their June meeting.

The Fed cited concerns about the outlook for inflation, with a number of participants noting that inflation had continued to run below the central bank's 2% target.

The minutes noted that a couple of participants preferred a 50 basis point cut in rates, favoring stronger action to better address stubbornly low inflation.

The minutes said a few participants expressed concerns the rate cut could be misinterpreted as a negative signal about the state of the economy.

The rate cut at the meeting was described as a "mid-cycle adjustment," with members hoping to avoid any appearance of following a preset course.

The central bank is under increasing pressure to cut rates from President Donald Trump, who has repeatedly slammed Fed Chairman Jerome Powell's approach to monetary policy in posts on Twitter.

Powell is scheduled to deliver a closely watched speech on the challenges for monetary policy at the Jackson Hole Economic Policy Symposium in Jackson Hole, Wyoming, on Friday.

Meanwhile, a report released by the National Association of Realtors today showed that existing home sales in the U.S. rebounded in the month of July, jumping by 2.5% to an annual rate of 5.42 million in July after slumping by 1.3% to a revised rate of 5.29 million in June.

Economists had expected existing home sales to surge up by 2.3% to a rate of 5.39 million from the 5.27 million originally reported for the previous month.


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Oil Futures Settle Lower Despite Drop In Crude Stockpiles

Trading 21 août 2019 Commentaire »

Despite data showing a weekly drop in U.S. crude inventories, oil prices edged lower on Wednesday on lingering concerns about the outlook for near term energy demand due to global economic slowdown.

The drop in stockpiles was less than expected and this rendered oil prices weak.

West Texas Intermediate Crude oil futures for October ended down $0.45, or about 0.8%, at $55.68 a barrel.

On Tuesday, WTI crude oil futures for October ended marginally down at $56.13 a barrel.

September oil futures expired at $56.34 a barrel on Tuesday, gaining $0.13, or about 0.2%, for the session.

Crude oil prices moved higher earlier in the session on Wednesday after data from the American Petroleum Institute showed that U.S. crude oil stocks fell by 3.5 million barrels to 439.8 million in the week ended August 16.

Data released by Energy Information Administration today showed U.S. crude stockpiles dropped by 2.7 million barrels in the week ended August 16, after registering increases in the previous two weeks.

Gasoline inventories were up 300,000 barrels last week, while distillate stockpiles increased by 2.6 million barrels.


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Treasuries Close Modestly Lower Following Choppy Trading Day

Trading 21 août 2019 Commentaire »

Treasuries showed a lack of direction over the course of the trading session on Wednesday before ending the day modestly lower.

Bond prices spent the afternoon lingering near the unchanged line but moved to the downside going into the close. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by 1.6 basis points to 1.577 percent.

The modestly lower close by treasuries came after the minutes of the Federal Reserve's latest monetary policy showed the central bank intends to remain flexible regarding future changes to interest rates.

Citing a lack of clarity about when the risks to the U.S. economy will be resolved, the minutes said members plan to pay close attention to the implications of incoming data for the economic outlook.

During the meeting in late July, the members of the Fed voted 8 to 2 to lower the target range for the federal funds rate by 25 basis points to 2 to 2-1/4 percent.

The Fed is scheduled to hold its next monetary policy meeting September 17th and 18th, with CME Group's FedWatch Tool currently indicating at 97.3 percent chance of another 25 basis point rate cut.

The central bank is under increasing pressure to cut rates from President Donald Trump, who has repeatedly slammed Fed Chairman Jerome Powell's approach to monetary policy in posts on Twitter.

"Doing great with China and other Trade Deals. The only problem we have is Jay Powell and the Fed. He's like a golfer who can't putt, has no touch. Big U.S. growth if he does the right thing, BIG CUT - but don't count on him! So far he has called it wrong, and only let us down," Trump tweeted ahead of the release of the minutes.

He added, "We are competing with many countries that have a far lower interest rate, and we should be lower than them. Yesterday, 'highest Dollar in U.S. History.' No inflation. Wake up Federal Reserve. Such growth potential, almost like never before!"

Powell, who was nominated by Trump, is scheduled to deliver a closely watched speech on the challenges for monetary policy at the Jackson Hole Economic Policy Symposium in Jackson Hole, Wyoming, on Friday.

Michael Pearce, Senior U.S. Economist at Capital Economics, said the Fed minutes left the impression policymakers are just taking their cue from the bond markets.

"We will hopefully get more clarity on future rate cuts when Powell speaks on Friday but, at this point, there is little sign that the Fed is willing to push back on the markets," Pearce said.

He added, "As such, another 25bp cut in September still looks like a good bet, if only because the Fed will not want to disappoint lofty market expectations."

On the U.S. economic front, the National Association of Realtors released a report showing a notable rebound in existing home sales in the month of July.

NAR said existing home sales jumped by 2.5 percent to an annual rate of 5.42 million in July after slumping by 1.3 percent to a revised rate of 5.29 million in June.

Economists had expected existing home sales to surge up by 2.3 percent to a rate of 5.39 million from the 5.27 million originally reported for the previous month.

A report on weekly jobless claims may attract some attention on Thursday, although traders may stick to the sidelines ahead of Powell's speech on Friday.


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Gold Futures Settle Flat Ahead Of Fed Minutes

Trading 21 août 2019 Commentaire »

Gold prices recovered after a weak start to end flat on Wednesday, with traders largely staying wary of making big moves ahead of the release of the minutes of the Federal Reserve's late July meeting.

The early weakness of the yellow metal was due to the firm trend exhibited by European and U.S. stocks thanks to increased risk appetite of investors.

The dollar index was sluggish right since morning and was last seen at 98.18, down marginally from previous close, after moving between 97.75 and 98.30.

Gold futures for December, which rose to $1,518.40 an ounce from an early low of $1,506.50, ended at $1,515.70, their previous close.

On Tuesday, gold futures for December ended up $4.10, or 0.3%, at $1,515.70 an ounce.

Silver futures for September ended up $0.003, at $17.151 an ounce, while Copper futures for September settled at $2.5855 per pound, up $0.0075 from previous close.

Traders were also reacting to President Donald Trump's comments that pressurize the central bank to reduce interest rates. Trump said the Fed's policies were hampering the country's growth and reducing its ability to compete economically.

According to a report released by the National Association of Realtors, existing home sales in the U.S. showed a notable rebound in the month of July, jumping 2.5% to an annual rate of 5.42 million, after slumping by 1.3% to a revised rate of 5.29 million in June.

Economists had expected existing home sales to surge up by 2.3% to a rate of 5.39 million from the 5.27 million originally reported for the previous month.


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Fed Intends To Remain Flexible Regarding Future Interest Rate Cuts

Trading 21 août 2019 Commentaire »

Citing a lack of clarity about when the risks to the U.S. economy will be resolved, the minutes of the Federal Reserve's latest monetary policy showed the central bank intends to remain flexible regarding future changes to interest rates.

The minutes of the Federal Open Market Committee meeting held in late July showed members intend to pay close attention to the implications of incoming data for the economic outlook.

During the meeting last month, the members of the Fed voted 8 to 2 to lower the target range for the federal funds rate by 25 basis points to 2 to 2-1/4 percent.

The minutes of the meeting attributed the interest rate cut to three broad categories of reasons, including signs of deceleration in economic activity in recent quarters, particularly in business investment and manufacturing.

The Fed partly attributed the deceleration to pronounced slowing in economic growth overseas, which likely reflected uncertainties surrounding international trade.

The rate cut was also described as a prudent step from a risk-management perspective, as risks and uncertainties associated with the global economic outlook and international trade remained elevated.

"On this point, a number of participants observed that policy authorities in many foreign countries had only limited policy space to support aggregate demand should the downside risks to global economic growth be realized," the Fed said.

Thirdly, the Fed cited concerns about the outlook for inflation, with a number of participants noting that inflation had continued to run below the central bank's 2 percent target.

The minutes noted that a couple of participants preferred a 50 basis point cut in rates, favoring stronger action to better address stubbornly low inflation.

Meanwhile, Kansas City Fed President Esther George and Boston Fed President Eric Rosengren voted to leave rates unchanged.

The Fed said George believed leaving rates unchanged was appropriate based on the incoming data and the outlook for economic activity over the medium term.

Acknowledging the risks to the economic outlook from trade policy uncertainty and weaker global activity, George indicated she would be prepared to lower rates should incoming data point to a materially weaker outlook.

Rosengren did not see a clear and compelling case for cutting rates given the unemployment rate stood near 50-year lows, inflation seemed likely to rise toward 2 percent, and financial stability concerns were elevated.

The minutes said a few participants expressed concerns the rate cut could be misinterpreted as a negative signal about the state of the economy.

In their discussion about the outlook for rates, participants generally favored an approach in which policy would be guided by incoming information and its implications for the economic outlook.

The rate cut at the meeting was described as a "mid-cycle adjustment," with members hoping to avoid any appearance of following a preset course.

"A number of participants suggested that the nature of many of the risks they judged to be weighing on the economy, and the absence of clarity regarding when those risks might be resolved, highlighted the need for policymakers to remain flexible and focused on the implications of incoming data for the outlook," the Fed said.

The Fed is scheduled to hold its next monetary policy meeting September 17th and 18th, with CME Group's FedWatch Tool currently indicating at 97.3 percent chance of another 25 basis point rate cut.

The central bank is under increasing pressure to cut rates from President Donald Trump, who has repeatedly slammed Fed Chairman Jerome Powell's approach to monetary policy in posts on Twitter.

"Doing great with China and other Trade Deals. The only problem we have is Jay Powell and the Fed. He's like a golfer who can't putt, has no touch. Big U.S. growth if he does the right thing, BIG CUT - but don't count on him! So far he has called it wrong, and only let us down," Trump tweeted ahead of the release of the minutes.

He added, "We are competing with many countries that have a far lower interest rate, and we should be lower than them. Yesterday, 'highest Dollar in U.S. History.' No inflation. Wake up Federal Reserve. Such growth potential, almost like never before!"

Powell, who was nominated by Trump, is scheduled to deliver a closely watched speech on the challenges for monetary policy at the Jackson Hole Economic Policy Symposium in Jackson Hole, Wyoming, on Friday.


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*Federal Reserve Releases Minutes From July Monetary Policy Meeting

Trading 21 août 2019 Commentaire »

Federal Reserve Releases Minutes From July Monetary Policy Meeting


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IMF: Currency Devaluations Due To Policy Easing Cannot Improve Trade Balance

Trading 21 août 2019 Commentaire »

The International Monetary Fund cautioned that monetary policy easing are unlikely to lead to currency devaluations that are adequate enough to cause a sustained improvement in a country's trade balance.

"One should not put too much stock in the view that easing monetary policy can weaken a country's currency enough to bring a lasting improvement in its trade balance through expenditure switching," IMF Chief Economist Gita Gopinath and researchers Gustavo Adler and Luis Cubeddu said on Wednesday in a blog post on the institution's website. "Monetary policy alone is unlikely to induce the large and persistent devaluations that are needed to bring that result," they added.

The IMF view comes at a time when the US President Donald Trump has accused China and the European Union of engaging in currency manipulation to benefit their exporters. Trade wars and currency devaluation concerns are set to be intensively discussed later this week when global central bankers will gather in Jackson Hole, Wyoming.


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*U.S. Crude Oil Inventories Drop By 2.7 Million Barrels In Week Ended 8/16

Trading 21 août 2019 Commentaire »

U.S. Crude Oil Inventories Drop By 2.7 Million Barrels In Week Ended 8/16


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Zambia Holds Rate Steady On High Inflation, Weaker Growth Outlook

Trading 21 août 2019 Commentaire »

Zambia's central bank left its key interest rate unchanged on Wednesday, after raising it in May, as it expects inflation to remain above its target and growth prospects to weaken in the near term.

The Monetary Policy Committee decided to hold the rate steady at 10.25 percent at its August 19-20 meeting, Bank of Zambia Governor Denny Kalyalya said in a statement.

The previous change in the rate was a 50 basis point hike in May.

"The Committee may adjust the Policy Rate upward, if inflation does not revert to the target range," Kalyalya said.

The bank projected inflation to remain above the upper bound of the 6-8 percent target range for much of the forecast horizon and to return to the target range towards the end of the forecast period.

Policymakers also pointed out the further weakening of near-term growth prospects, liquidity challenges, and risks to financial stability.

Further, tackling large fiscal deficits, elevated debt and debt service levels, high domestic arrears, and liquidity challengers remains critical, the bank said.

The next rate-setting session is scheduled for November 18-19.


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U.S. Existing Home Sales Rebound More Than Expected In July

Trading 21 août 2019 Commentaire »

Existing home sales in the U.S. showed a notable rebound in the month of July, according to a report released by the National Association of Realtors on Wednesday.

NAR said existing home sales jumped by 2.5 percent to an annual rate of 5.42 million in July after slumping by 1.3 percent to a revised rate of 5.29 million in June.

Economists had expected existing home sales to surge up by 2.3 percent to a rate of 5.39 million from the 5.27 million originally reported for the previous month.

"Falling mortgage rates are improving housing affordability and nudging buyers into the market," said NAR chief economist Lawrence Yun.

However, Yun noted the supply of affordable housing is severely low, adding, "The shortage of lower-priced homes have markedly pushed up home prices."

The report said the median existing home price for all housing types in July was $280,800, down 1.6 percent from $285,300 in June but up 4.3 percent from $269,300 in the same month a year ago.

Total housing inventory decreased to 1.89 million existing-homes available for sale at the end of July from 1.92 million at the end of June.

The unsold inventory represents 4.2 months of supply at the current sales pace, down from 4.4 months in June and 4.3 months in July of 2018.

NAR said single-family home sales spiked by 2.8 percent to an annual rate of 4.84 million in July, while existing condominium and co-op sales were nearly flat at 580,000.

The report also showed existing home sales rose in the Midwest, South and West but fell slightly in the Northeast region.

On Friday, the Commerce Department is scheduled to release a separate report on new home sales in the month of July. New home sales are expected to come in nearly unchanged in July after soaring by 7.0 percent in June.


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