The U.S. dollar was gaining this morning on a stronger-than-expected GDP report, rising expectations of a Fed rate hike, and easing concerns about global growth. Second quarter GDP was up 3.9%, well ahead of consensus expectations of 3.7%.
Today’s insight includes John Boehner’s resignation, China’s public statement, meetings on Japanese tax rates, and rising oil prices.
Market selloff: The Dow Jones Industrial Average gained more than 130 points this morning after Federal Reserve Chair Janet Yellen eased fears about slowing global growth during a speech on Thursday evening. Yellen said she anticipates that interest rates will increase this year. Meanwhile, the U.S. Commerce Department announced that the U.S. economy expanded more than previously thought at 3.9%. The Dow was also boosted by a strong earnings report from athletic shoe and apparel giant Nike Inc. (NKE).
Government shutdown: With a stronger-than-expected GDP report, all eyes will turn to next Friday’s report on the September unemployment rate. However, concerns about a government shutdown in Washington could threaten the report’s release by the Bureau of Labor Statistics. During a speech last night in Amherst, Massachusetts, Yellen said that the Fed would likely raise interest rates if inflation stabilized and employment continued its positive momentum. U.S. House of Representatives Speaker John Boehner announced plans to resign as leader next month.
Shifting the blame: This morning, the spokesman for China’s National Bureau of Statistics attempted to boost confidence in the nation’s economy during a press conference. The Bureau expects a jobless rate for the nation around 5.1%, and said that the world’s second-largest economy is not a risk to the broader world. The spokesman said that U.S. regulators should not “exaggerate” the impact of China’s economy, and that the Fed’s actions play a major impact on other nations’ economies.
Crude: Crude oil prices were up today as dollar pressures eased. This offset concerns about global demand, weak consumer data in Japan, and news of a ratings cut on the price of oil by Standard and Poor’s. U.S. WTI prices gained 2.45%, while Brent prices added 1.39%.
The ICE U.S. dollar index added 0.32% against a basket of six international currencies to hit 96.305 on news that Fed Chair Janet Yellen left the door open for an interest rate hike. The dollar is on pace for its best week in more than two months.
USD/JPY: The dollar hit a two-week high against the yen, adding 0.53%, after the island nation reported weaker-than-expected consumer data. Bank of Japan governor Haruhiko Kuroda met with Prime Minister Shinzo and said that the nation’s price trend is strong and that its Consumer Price Index decline was more tied to a decline in oil prices. Kuroda would not say whether the central bank planned to ease monetary policy any further. Japan’s ruling party leaders were scheduled to meet this afternoon to discuss the nation’s tax rates.
GBP/USD: The cable continued to slide this morning, dipping 0.25%, as expectations for a rate hike pushed the dollar higher.
EUR/USD: The euro dipped 0.35% against the dollar as traders see an increasing likelihood of a rate hike. Traders are keeping an eye on the European Central Bank after its president Mario Draghi said this week that his team is not prepared to expand its bond-purchasing program in the near term, despite added pressure in the wake of the Federal Reserve’s delay last week.
AUD/USD: The Australian dollar slid by 0.13% as concerns about commodity prices and exposure to China continue to weight down the currency.
USD/CAD: The dollar slipped 0.09% against the loonie.
Check back on Monday at FXHQ.com for more insight on speeches from three members of the Federal Reserve, the August report on monthly home sales, and September update on Italian business and consumer confidence.