Friday, 27 June 2014 Highlights: The dollar traded mixed to higher against most major currencies on Thursday after a widely-watched Federal Reserve official said earlier that interest rates could rise sooner rather than later, possibly in early 2015, which helped offset sluggish data. 1. In U.S. trading on Thursday, EUR/USD was down 0.16% at 1.3607. 2. St. Louis Federal Reserve President James Bullard told Fox Business Network earlier that an improving economy may make conditions ripe for interest rates to rise possibly in early 2015. 3. The Commerce Department reported Wednesday that U.S. gross domestic product contracted at an annual rate of 2.9% in the first quarter of the year, far surpassing consensus forecasts for a decline of 1.7%, though markets quickly brushed off the dismal numbers as a weather-related disappointment. 4. I think the markets right to shake this off, Bullard told the network, describing the contraction as an aberration. 5. If you throw out the first quarter and just look forward over the next four quarters, most forecasters have 3%-plus growth. 6. Inflation, while still low, is on the rise and approaching the Feds 2% target. 7. My forecast actually has us moving through 2% and over 2% in 2015, which bolstered the dollar despite lackluster U.S. data. 8. The U.S. Department of Labor said the number of individuals filing for initial jobless benefits in the week ending June 21 declined by 2,000 to 312,000 from the previous week’s revised total of 314,000. 9. Analysts had expected jobless claims to fall by 4,000 to 310,000 last week. 10. A separate report showed that U.S. personal spending rose 0.2% last month, below expectations for an increase of 0.4%. Personal spending for April was revised to a flat reading from a previously reported decline of 0.1%. 11. The dollar was down against the yen, with USD/JPY down 0.19% at 101.68, and up against the Swiss franc, with USD/CHF up 0.12% at 0.8938. 12. The greenback was down against the pound, with GBP/USD up 0.24% at 1.7023. 13. The Bank of England said earlier that from October it will cap mortgages, so that people borrowing 85% of a houses value will not be allowed to borrow more than 4.5 times their income. 14. The bank also announced a new affordability test on banks, whereby borrowers will now have to show that they can repay the mortgage even if interest rates rise 3%, up from 1% previously. 15. BoE Governor Mark Carney said the recovery in the U.K. economy is broadening and strengthening, but the housing market is the main risk to financial stability. 16. The bank acknowledged that the immediate impact of the cap would be minimal as most lenders already lend within the 4.5 income limit, but Carney said the measures will have an impact of the durability of the expansion. 17. Demand for sterling continued to be underpinned as the new measures did little to alter expectations that the BoE will raise interest rates ahead of other central banks. 18. The dollar was down against its cousins in Canada, Australia and New Zealand, with USD/CAD down 0.28% at 1.0690, AUD/USD up 0.01% at 0.9407 and NZD/USD up 0.39% at 0.8772. 19. The US Dollar Index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.02% at 80.28. 20. On Friday, the U.S. is to round up the week with revised data on consumer sentiment.
Posted on: Fri, 27 Jun 2014 15:25:30 +0000
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