Forex
The dollar strengthens against other currencies in anticipation of Fed chief’s speech
In today’s trading the dollar strengthened against other currencies in the morning, the market is waiting for Federal Reserve (Fed) Chairman Jerome Powell to speak at the annual economic symposium in Jackson Hole.
The ICE computed index showing the dollar’s movement against six currencies (euro, Swiss franc, yen, Canadian dollar, pound sterling, and the Swedish krona) is up 0.12%, while the broader WSJ Dollar Index is up 0.19%.
At $0.9962 for the euro, up from $0.9975 at market close the day before, the euro is losing about 0.1%. The pound was $1.1804 at the same time, versus $1.1832 at the close of the previous session, dropping about 0.3%. In pair with the Japanese currency, the U.S. rate was 136.87 yen against 136.49 yen the day before, increasing by 0.25%.
What does it mean when the dollar strengthens?
Powell, as expected, will confirm in his speech on Friday the intention of the Federal Reserve to achieve the slowdown in inflation by tightening monetary policy. The day before, his colleagues at the Fed’s leadership expressed similar thoughts.
Federal Reserve Bank of Philadelphia Governor Patrick Harker said the central bank should gradually raise its key interest rate to above 3.4% and then hold it at that level for some time.
Kansas City Fed Chair Esther George said the size of the September rate hike is still hard to predict because of a lack of data. The August U.S. inflation report will not be released until September 13, a week before the Fed meeting.
Also, the market is evaluating the data published the day before, according to which reducing the US GDP in the 2nd quarter was 0.6% in annualized terms. Preliminary estimates were worse and indicated a decline of 0.9%.
The Commerce Department is releasing its July Personal Income and Expenditures report today. That report also contains data on the Consumer Price Index (PCE index), which the Fed closely tracks when assessing inflation risks.
The index jumped 6.8% year over year in June, the fastest pace since 1982, and excluding food and fuel prices, the increase was 4.8%. Analysts polled by Trading Economics expect the latter index to slow to 4.7% in July.
Earlier we reported that the price of gas in Europe surpassed $3360/kcm, marking a new high since March.
U.S. stock index futures are rising Thursday, trading data showed. Markets are assessing the outcome of the U.S. Federal Reserve (Fed) meeting.
The Dow Jones Industrial Average (DJIA) futures rose 0.22% to 32,329 points, the NASDAQ high-tech index rose 0.96% to 12,828.5 points and the S&P 500 broad market index rose 0.48% to 3,989.75 points.
The Fed on Wednesday expectedly raised its benchmark rate by 25 basis points to 4.75-5% per year. The regulator noted that it does not expect the rate reduction this year, but allows it next year. U.S. exchanges were down 1.6% in Wednesday trading.
According to the CME Group, 55.8% of analysts now expect the Fed’s discount rate to remain unchanged in May, while 44.2% expect it to rise another 25 basis points. Thus, markets concede that the Fed may interrupt the cycle of hikes that began last March.
At the same time, shares of cryptocurrency exchange Coinbase were down 10.6% in pre-bid trading. The exchange this week received notice from U.S. authorities of an impending charge of violating laws.
Later in the trading, statistics on initial jobless claims in the U.S. for the week through March 18 will be released. Analysts forecast that the figure would increase by 5 thousand to 197 thousand applications.
Earlier we reported that the US budget deficit was $262bn in February.
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According to a report from the U.S. Treasury Department, the U.S. budget deficit in February was $262,434 billion compared to a $38.8 billion deficit in January. The Dow 30 also had problems.
Analysts at DailyFX suggested that the nation’s budget deficit for February was expected to be $256 billion. A year earlier, in February, the U.S. posted a budget deficit of $216,590 billion.
According to the GAO report, U.S. government spending rose 3.5 percent year over year last month to $524.548 billion, while revenue, in contrast, declined 9.5 percent to $262,114 billion.
Earlier, the U.S. edition of the Washington Post published an editorial stating that the new draft budget proposed by the Biden administration undermines U.S. national security and its ability to invest in the future, because it suggests a further growth of the U.S. national debt.
The WP editorial board noted that the new draft budget assumes a $2 trillion budget deficit, including due to the high cost of providing health insurance to the elderly of the baby boomer generation.
Earlier we reported that the EU has agreed to reduce energy consumption by 11.7% by 2030.
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