Investors are monitoring the Federal Reserve’s policy meeting beginning today to gauge the US central bank’s view of the global economy and whether any
A delay in any hike in interest rates could send the US dollar tumbling. With US inflation weak, the European economy stumbling and the dollar on the rise, the big question is to what extent Fed officials acknowledge risks to their expectations that the US recovery will continue to strengthen and allow them to raise rates around the middle of next year.
Market views have now shifted to 66% of economics now expecting an interest rate increase in the 4th quarter of 2015. Just a few months ago, the same economists were predicting the first increase as early as May 2015. The US dollar is trading at 85.60 down 2 points this morning but pressure and lackluster economics data over the past week has limited the greenbacks movement. Yesterday, pending home sales missed expectations showing a weakness in the US housing market.
The USD eased to 107.805 yen, retreating from Monday’s near three-week peak of 108.38. It also gave up a bit of ground against the euro, which last traded at $1.2711 off Monday’s low of $1.2665. The dollar was lifted earlier on Monday after a closely-watched Ifo report showed German business sentiment in October hit its lowest level in almost two years. Euro sentiment remained positive after the ECB stress test results held no surprises and the worries passed the market.
The Japanese yen climbed to 107.83 after retail sales exceeded expectations. Retail sales in the country rose 2.3 per cent in September, year-on-year, which was a much bigger gain than economists had expected.
Analysts surveyed by Bloomberg had forecast a gain of just 0.8 per cent.
September’s increase in retail trade was the biggest since March, when the year-on-year measure leapt by 11 per cent as shoppers got big purchases in ahead of an increase in the national sales tax that was implemented the following month. The data will be a fillip to Japanese prime minister Shinzo Abe, who has been campaigning to revive the long-moribund economy. It may, however, dissuade the Bank of Japan from responding to calls to crank up its already aggressive levels of monetary stimulus. The Bank of Japan will be meeting later this week.