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Dollar weakens after Fed minutes
-- The U.S. dollar weakened against its major rivals on Wednesday, turning negative against both the yen and the euro after the Federal Reserve said there was considerable uncertainty surrounding fiscal policy, something investors have been looking to boost the dollar and stoke inflation. The U.S. dollar index DXY, -0.15% fell slightly on the day, after having risen by about 0.2%.
The comments, which were released as part of minutes from the Fed's most recent meeting, said that uncertainty over the Trump administration's fiscal policies were a major stumbling block. The minutes also revealed that "many" Fed officials had expressed support in raising interest rates "fairly soon," adding to the growing consensus that a rate hike could be announced at the March meeting, something that had been considered unlikely a few weeks ago. See full story.
Dollar rises after Fed comments
-- The U.S. dollar strengthened against major rival currencies Tuesday, as comments from a Federal Reserve official helped to drive up U.S. Treasury yields and with them, demand for the U.S. currency. The ICE U.S. Dollar Index DXY, which gauges the buck against a basket of six rivals, rose 0.5% to 101.4400.
“The latest catalyst pushing the dollar higher was a rising yield on the benchmark U.S. Treasury note following comments by Philadelphia Federal Reserve Bank President Patrick Harker,” said Akira Moroga, manager of forex product group at Aozora Bank. Harker signaled in an interview with Market News International that he would likely support an interest-rate increase at the central bank’s next meeting in March if he sees additional evidence that inflation is gaining momentum. Higher rates can boost the U.S. currency by making dollar assets more attractive to yield-seeking investors. See full story.
Greece misses another bailout deadline
-- Euro-area finance ministers on Monday poured cold water on a quick disbursal of new aid payments, with Athens and its creditors agreeing to pick up discussions in the coming days. Greek bonds rallied. Creditors are demanding that the nation institute tax, pension and labor reforms before they’ll sign off on an agreement. Officials had once pinpointed Monday’s meeting in Brussels as the final chance to get Greece its money before Europe’s politicians get too distracted by upcoming national elections.
“There is still a lot of work that needs to be done,” Dutch Finance Minister Jeroen Dijsselbloem, who chaired the meeting, told reporters. With Athens having about 6 billion euros ($6.3 billion) in bonds coming due in July, there’s no need for a disbursement through May, he said. After months of disagreements, European creditors have fallen into line with International Monetary Fund demands over the structural reforms. Greek Finance Minister Euclid Tsakalotos met representatives of creditor institutions ahead of the meeting and sufficient progress was made for the bailout auditors to continue negotiations. They will go back to Athens “in the very short term,” Dijsselbloem said. See full story.
World stocks retreat from record
-- Stocks on major world markets retreated on Friday in the wake of consecutive sessions of record highs, as investors awaited clarity on U.S. President Donald Trump's tax and trade policies. Despite the decline, the MSCI All-Country World index remained on track for its fourth straight week of gains, its longest winning streak in a nearly a year, after rising to a record high on Thursday on positive signs of global economic growth. Wall Street was lower for a second straight day as financial stocks, down 0.3 percent, and the energy sector off 0.8 percent, weighed on equities. Banks had provided a boost earlier in the week when U.S. Federal Reserve Chair Janet Yellen gave testimony that appeared to open the door for a rate hike in March.
Markets have also been supported by expectations of concrete fiscal plans from the Trump administration, which vowed last week to announce a tax reform plan in the coming weeks. The S&P 500 has not registered a decline of 1 percent or more since October 11. "Expectations were pretty high for the stimulus package and the tax cut package," said David Schiegoleit managing director at U.S. Bank Private Client Reserve in Los Angeles. "When expectation meets reality, that is when the market adjusts." See full story.
Dollar slips on political uncertainty
-- The U.S. dollar fell against its rivals on Thursday, with politics still a major driver as investors awaited more detail on tax-policy plans from President Donald Trump’s White House and remained cautious about what some see as protectionist tendencies. The ICE Dollar Index DXY, which gauges the buck against a basket of six rivals, was down 0.6% at 100.57. While the dollar spiked after Trump’s election in November, as investors bet that his policies on taxes and fiscal spending would stoke inflation, it has struggled for direction of late. The index is down about 1.6% so far this year, though it is up 1.1% in February.
“The dollar continues to struggle despite better-than-expected economic data and growing expectations that the Federal Reserve will raise interest rates in March,” said Valentin Marinov, chief G-10 FX strategist at Crédit Agricole. “A lot of our clients are wondering what’s keeping the dollar from rebounding, and most are pointing to political risk, with Trump fueling expectations about a currency war, which is discouraging long-dollar bets,” he said. See full story.
Inflation surges by most in four years
-- The prices Americans pay for goods and services surged in January by the largest amount in four years, mostly reflecting a rebound in the cost of gasoline that’s taking a bigger chunk out of household incomes. The consumer price index, or cost of living, rose by a seasonally adjusted 0.6% in January, the government said Wednesday. Economists polled by MarketWatch had predicted a 0.3% increase. As has been the case lately, a big increase in the cost of gasoline accounted for almost half of the increase in consumer inflation in January.
The cost of filling up at the gas station has climbed to a nationwide average of $2.30 a gallon from just under $2 last spring, according to government figures. Over the past year the consumer price index has climbed 2.5%, the biggest increase in a 12-month span in five years. For years low inflation had helped keep the Fed from raising historically low interest rates, but some top bank officials suggest the time has come to be more aggressive. Chairwoman Janet Yellen on Tuesday did not go that far in testimony in Congress, though she pointed out that inflation is no longer “at very low levels.” See full story.
Producer inflation boosted by energy prices
-- U.S. producer prices recorded their largest gain in more than four years in January amid increases in the cost of energy products, but a strong dollar continued to keep underlying inflation at the factory gate tame. Rising raw material costs are boosting producer prices across the globe, notably in China, which is the biggest source of U.S. imports. But economists still expect overall U.S. inflation to keep climbing gradually given the buoyant dollar. "China saw the biggest price gain since 2011 in January. Given that most of the upward price pressure is the result of raw materials prices returning from the depths of last year, the longer-term view continues to be wary but not alarmed," said Jay Morelock, an economist at FTN Financial in New York.
The U.S. Labor Department said on Tuesday its producer price index for final demand jumped 0.6 percent last month, which was the biggest rise since September 2012 and followed a 0.2 percent gain in December. Higher prices for some services also contributed to the increase in January. Economists had expected the PPI to rise 0.3 percent in January. Despite the surge, the PPI only increased 1.6 percent in the 12 months through January after a similar gain in December. A measure of underlying producer price pressures that excludes food, energy and trade services advanced 0.2 percent after edging up 0.1 percent in December. The so-called core PPI rose 1.6 percent in the 12 months through January, slowing from December's 1.7 percent gain. The Federal Reserve has a 2 percent inflation target. See full story.
Global stocks higher on Trump policy bets
-- A gauge of global equity markets advanced on Monday and bond yields rose, buoyed by a re-emergence of assets likely to benefit from reflationary policies that are expected to be implemented by U.S. President Donald Trump. Financials and banks in particular led equities on Wall Street higher as investors bet Trump's tax reform plans and softer regulatory environment will boost economic growth and corporate profits.
Comments from Trump on Thursday that he plans to announce what he said would be the most ambitious tax reform plan since the Reagan era in the next few weeks rekindled hopes for big tax cuts while the announced resignation of the Fed's top bank regulator on Friday heightened expectations for a loosening of rules on banks. "At some point there has to be actions that match the words and I think we are getting closer to that point," said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management. Investors were also encouraged by the two-day U.S.-Japan summit held over the weekend apparently having ended smoothly without Trump talking tough on trade, currency or security issues. See full story.
Trump's tax talk drives Wall Street
-- U.S. stocks hit record highs for the second day on Friday as investors remained upbeat about a tax reform plan that President Donald Trump vowed to unveil in the coming weeks. Trump's promise of a "phenomenal" tax plan helped reignite a post-election rally, which had stalled in recent weeks on concerns over his protectionist stand and the lack of clarity on policy reforms.
"The market is saying, 'Thank you for coming back to the very core of the reasons we have accepted your agenda'," said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey. Oil prices rose more than 2 percent after reports that OPEC members delivered more than 90 percent of the output cuts they pledged in a landmark deal that took effect in January. See full story.
Dollar rises after Trump promises tax plan
-- The U.S. dollar and bond yields rose on Thursday after comments from President Donald Trump that he would be releasing his "phenomenal" tax plan in the next few weeks. Investors have been waiting for details on Trump's election campaign pledge to stimulate economic growth with large-scale fiscal stimulus through infrastructure spending and tax cuts. In a meeting with airline executives at which Trump talked about the need to modernize the U.S. air traffic control system, the president also said his administration will be announcing "something phenomenal in terms of tax" over "the next two or three weeks".
"It's been a broad-based dollar rally, driven by the headlines that Trump plans to announce something phenomenal on taxes in the next few weeks, in his words," said Kathy Lien, managing director of BK Asset Management. "That was really the crux of the dollar rally shortly after his election and I think investors are getting really excited about that again." See full story
Dollar struggles, with focus on Europe
-- The U.S. dollar dipped Wednesday, retreating from an early advance though investors continued to watch the political situation in Europe with caution. The coming election in France is seen as a potential headwind for markets, in the wake of far-right candidate Marine Le Pen launching her presidential campaign over the weekend. Polls indicate an uphill climb for Le Pen to be elected, but she has pushed for France to leave the eurozone. When the United Kingdom voted to do so last year, it took the U.K.’s pound to multidecade lows. “There’s a growing sense of concern on the political backdrop as people attach a higher and higher probability to the prospect of something unusual happening in the elections we have coming up this year,” said Adam Cole, head of G-10 FX strategy at RBC Capital Markets.
In addition to the election in France, votes in both Germany and Italy later in the year are seen as potential market-moving events. “Politics is something the market is going to have to keep thinking about,” Cole said. The ICE U.S. dollar index DXY dipped 0.1% to 100.10. The buck has struggled for direction of late, having dropped 2% thus far this year. However, it also remains up by 2.2% since the election, with much of that advancing coming in the wake of Donald Trump’s electoral victory in the U.S. The index recently rallied to its highest level since 2002 in early January. See full story.
Dollar strengthens against euro, yen
-- The dollar on Tuesday strengthened against most of its major currency rivals. Market participants attributed the moves to a combination of hawkish comments from a Federal Reserve official who left the door open to a interest-rate increase in March as well as weakness in the euro due to uncertainty over coming elections in France. The ICE Dollar Index DXY, rose as much as 0.8% but trimmed gains to remain up 0.4% at 100.28 late Tuesday. The dollar has been drifting lower over the past two months after hitting a 14-year high in mid-December.
On Tuesday, investors bid up the dollar after Philadelphia Fed President Patrick Harker said he could support raising interest rates at the central bank’s March meeting. “I think March is on the table. I would never take a meeting off the table,” Harker told reporters after a speech in San Diego. He also reiterated his support for about three rate increases this year. Financial markets are currently only pricing in two increases in 2017, even as the Fed has signaled it could tighten three times. For March, federal-funds futures, a popular way for the market to convey rate-hike expectations, are signaling that the chances of a rate increase in March are a relatively low 13%, compared with 9% on Monday, according to CME Group data. “The dollar had been correcting since the Fed raised rates in mid-December, mostly because Trump has took his focus off the fiscal policies,” said Win Thin, global head of emerging-market currency strategy at Brown Brothers Harriman. See full story.
ECB sees crisis in Trump deregulation
-- The European Central Bank rejected U.S. accusations of currency manipulation on Monday and warned that deregulating the banking industry, now being openly discussed in Washington, could sow the seeds of the next financial crisis. Arguing that lax regulation had been a key cause of the global financial crisis a decade ago, ECB President Mario Draghi said the idea of easing bank rules was not just worrying but potentially dangerous, threatening the relative stability that has supported the slow but steady recovery. Draghi's words are among the strongest reactions yet from Europe since U.S. President Donald Trump ordered a review of banking rules with the implicit aim of loosening them. That raises the prospect of the United States pulling out of some international cooperation efforts.
"The last thing we need at this point in time is the relaxation of regulation," Draghi told the European Parliament's committee on economic affairs in Brussels. "The idea of repeating the conditions that were in place before the crisis is something that is very worrisome." The ECB supervises the euro zone's biggest lenders. Andreas Dombret, a member of the board of Germany's powerful central bank, the Bundesbank, said that reversing or weakening regulations all at once would be a "big mistake", because it would increase the chance of another financial crisis. See full story.
Job growth accelerates but wages lag
-- U.S. job growth surged more than expected in January as construction firms and retailers ramped up hiring, but wages barely rose, handing the Trump administration both a head start and a challenge as it seeks to boost the economy. Nonfarm payrolls increased by 227,000 jobs, the largest gain in four months, the Labor Department said on Friday. The unemployment rate, however, rose one-tenth of a percentage point to 4.8 percent and wages increased by only three cents, suggesting that there was still some slack in the labor market.
Still, the labor market is tightening and could hopefully soon spur faster wage growth. Federal Reserve officials view the jobs market as being at or near full employment. U.S. government bond prices initially rose as traders focused on the disappointing wage growth, which investors saw as keeping the Fed on a gradual path of interest rate increases this year. In the afternoon, U.S. Treasuries were trading lower while the dollar edged up against a basket of currencies. See full story.
Dollar weakens after Fed, Trump
-- The U.S. dollar weakened against its major rivals on Thursday, with a key index touching an 11-week low after the Federal Reserve disappointed hawkish investors and hinted there wouldn’t be a rate increase in March. The recently inaugurated President Donald Trump also continued to cause volatility in the currencies market after a call between Trump and the Australian prime minister added to geopolitical jitters. The ICE Dollar Index DXY,which measure the dollar against a half-dozen other currencies, fell 0.2% to 99.43. At its low of the session it fell to 99.23, its weakest level since Nov. 14, according to FactSet data. The dollar index is down 2.7% thus far this year, though it remains close to a high of 103.82 hit earlier this year, which represented the highest level for the index since 2002.
The Fed on Wednesday left the federal-funds rate in a range of 0.5% to 0.75%, saying that “measures of consumer and business sentiment have improved of late” but said business investment remains “soft.” In December, the Fed signaled it wants to raise interest rates three times this year. The market, however, expects two rate increases, with the first coming in June. “With Donald Trump’s protectionist policies dragging the dollar lower since the inauguration, traders would have been looking for the Fed to bring some sort of balance to support the dollar,” said Richard Perry, market analyst at Hantec Markets, in a note. “However, the Federal Reserve monetary policy update was something of a non-event. No hike, just as expected, and also there was very little change to the FOMC statement which could have been used to hint at a possible hike in March,” he added. See full story.
Fed leaves interest rates unchanged
-- The Federal Reserve held interest rates steady on Wednesday in its first meeting since President Donald Trump took office, but painted a relatively upbeat picture of the U.S. economy that suggested it was on track to tighten monetary policy this year. The U.S. central bank said job gains remained solid, inflation had increased and economic confidence was rising, although it gave no firm signal on the timing of its next rate move. Fed policymakers are still awaiting clarity on the possible impact of Trump's economic policies.
"Measures of consumer and business sentiment have improved of late," the Fed said in a unanimous statement following a two-day policy meeting in which it left its benchmark interest rate in a range of 0.50 percent to 0.75 percent. The Fed also highlighted that the unemployment rate, currently at 4.7 percent, was still hovering near its recent low. Financial markets were little changed after the rate decision, while investors were still expecting the next rate increase to occur in June, according to Fed funds futures data compiled by the CME Group. See full story.
Trump comments knock dollar to 2017 lows
-- The dollar tumbled on Tuesday, headed for its worst start to a year in over a decade, while stocks cemented their biggest losses in six weeks as U.S. President Donald Trump added uncertainty to the market following stringent curbs on travel to the United States. Comments from Trump's top trade adviser, Peter Navarro, that Germany was using a "grossly undervalued" euro to gain advantage over the U.S. knocked the dollar in early North American trading. Trump followed up on those comments in a meeting with the chief executives of several top drugmakers, during which he said drug companies had outsourced production because of currency devaluation by other countries.
That dragged the dollar index .DXY, which tracks the greenback against six rival currencies, to its lowest since Dec. 8. The index is down 2.6 for the month, on pace for its worst January since 2006. "You don't talk about levels, don't really talk about valuation and you certainly don't talk about other people's currencies," said Greg Anderson, Global head of FX strategy for BMO Capital Markets in New York. "You can maybe make a comment or two about your own but you don't talk about others'." Anderson also noted that Navarro isn’t Treasury secretary and the Treasury secretary is usually the spokesperson for currency. "This hasn't been done before. It's maybe a little unsettling for the market," he said. See full story.
Trump travel curbs weaken stocks
-- Major world equity markets fell on Monday and the dollar slipped against the safe-haven yen after new U.S. immigration curbs stirred concerns about the impact of U.S. President Donald Trump's policies on global trade and the economy. Stocks fell almost 1 percent on Wall Street and more in Europe after Trump's executive order on Friday, to bar Syrian refugees and suspend travel to the United States from seven countries, put the spotlight back on his protectionist bent.
The dollar fell against the yen as investors sought the traditional security of the Japanese currency, and gold edged higher amid heightened political uncertainty. Spot gold rose 0.4 percent to settle at $1,193.20 an ounce, while the dollar slipped 1.15 percent to 113.74 yen. The negative reaction to Trump's orders put the key U.S. stock indexes on course for their worst day in more than three months. The CBOE Volatility index, known as Wall Street's "fear gauge," rose 1.62 points to 12.20 from multi-year lows. See full story.
Growth rate slows to 1.9% in Q4
-- The U.S. economy’s expansion slowed in the fourth quarter, and annual growth failed to reach 3% for an 11th straight year, reflecting the huge hurdles the Trump administration faces in trying to speed up a 7½-year-old expansion. Gross domestic product, the official score card for the economy, expanded at a 1.9% annual clip from October to December, the Commerce Department said. That’s a marked drop from a 3.5% growth rate in the third quarter and below the 2.2% MarketWatch-compiled consensus. For the full year, the U.S. grew just 1.6%, compared with its 2.6% clip in 2015. It was the weakest performance since 2011. The last time the U.S. topped 3% growth — the historical average is 3.3% — was in 2005.
President Donald Trump has vowed to push the economy into higher gear with an aggressive combination of tax cuts, reduced regulations and more government spending on public works. Yet economists say it will take time before the U.S. reaps any benefits. Most predict the economy will grow around 2% or a bit faster in 2017. If Trump’s approach works, the payoff is unlikely to come until the end of the year or early 2018, they say. A wider trade deficit — a negative for GDP — was by far the biggest anchor in the fourth quarter. The economy would have topped 3% growth if the trade gap has basically been unchanged. See full story.
Dollar firms but stuck in a tight range
-- The dollar firmed against the euro and the yen but was confined to a tight range on Thursday as investors continued to weigh President Donald Trump’s protectionist stance against his promise of fiscal stimulus. Trump administration’s promise to cut regulations and promote infrastructure projects during his first week in office helped propel equity markets to record highs on Wednesday and the Dow Jones Industrial Average above 20,000 for the first time. As stocks rose, investors ditched their holdings in safe assets including government debt, sending the yield on benchmark 10-year Treasurys to 2.54%, its highest close since Dec. 27.
“There is still no clarity about what Trump administration can and will do in terms of fiscal stimulus and traders are weary of pushing the dollar higher,” said Neil Mellor, chief currency strategist at BNY Mellon, referring to recent slump in the buck. “In the short-term, the market is too preoccupied by Trump presidency and traders can’t take long positions with confidence,” Mellor said. The ICE Dollar index, a measure of the buck against a basket of six major rivals, is up 0.6% at 100.68. The WSJ Dollar Index BUXX, +0.50% a measure of the U.S. dollar against a wider basket of major currencies, was up 0.5%. (See full story.)
Dow tops 20,000 on Trump rally
-- Global equity prices rallied and the Dow Jones Industrial Average blew past the psychological 20,000 level on Wednesday, lifted by strong Japanese trade data, robust earnings and hopes that U.S. President Donald Trump will press ahead with a large fiscal spending package. The rally in stocks boosted U.S. Treasury debt yields, but lingering concerns about growing protectionism and the potential negative effects on global trade and growth pushed the U.S. dollar lower. MSCI's world index, which tracks shares in 46 countries, hit a 19-month high, up 0.76 percent.
Data showing Japan's exports rising for the first time in 15 months in December and strong corporate results in Europe boosted the index. Rallying U.S. stocks pushed it higher. Strong earnings numbers and renewed focus on Trump's pro-growth initiatives, however, reignited a post-election rally and pushed the three major benchmark U.S. stock indexes to record highs. "The Trump rally was reignited because he went from promise to process, so you're seeing some executive orders which are the first order of business," said Art Hogan, chief market strategist at Wunderlich Securities. Trump has made several business-friendly decisions since taking office on Friday, including signing executive orders to reduce regulatory burden on domestic manufacturers and clearing the way for the construction of two oil pipelines. See full story.
Stocks, dollar rise; investors eye earnings
-- Stocks rose on Tuesday as investors looked past U.S. President Donald Trump's protectionist rhetoric and focused on encouraging economic data and quarterly earnings reports. The U.S. dollar firmed against the yen and euro after losses in the wake of Trump's inaugural speech promising more trade protectionism, while U.S. Treasury yields recovered from Monday's slide. MSCI's world index, which tracks shares in 46 countries, was up 0.5 percent, helped by signs of a revival of economic activity around the world. Japanese manufacturing showed the fastest expansion in almost three years and a 5-1/2-year peak in French business activity provided the latest proof of a nascent euro zone recovery.
U.S. stocks recovered strongly after Monday's dip. The S&P 500 and Nasdaq touched intraday records and the Dow was poised for its best day of the year, lifted by gains in the financial and technology sectors. The advance comes as investors assess quarterly earnings reports, while trying to find more clarity on Trump's economic policies. See full story.
Stocks defensive on Trump's protectionism
-- The S&P 500 was on track for its worst day this year as President Donald Trump's protectionist stance on trade sent investors scurrying for safe-haven assets on Monday. In his latest executive order, Trump signed to formally withdraw the United States from the 12-nation Trans-Pacific partnership trade deal. Earlier in the day, Trump met with a dozen prominent American manufacturers at the White House and said he would slash regulations and cut corporate taxes to boost the economy.
"The markets are less enthusiastic about protectionism than they are about pro-growth policies such as cutting taxes and decreasing regulation," said Art Hogan, chief market strategist at Wunderlich Equity Capital Markets. The Trump rally, which led Wall Street to repeated highs since the election, has stalled in recent weeks as investors fretted about the potential impact of his isolationist stance on world trade and the lack of clarity on his policies. Trump has also vowed to renegotiate the North American Free Trade Agreement (NAFTA) with leaders of Canada and Mexico. See full story.