The euro was trading just above a three-month low against the dollar on Thursday, with the focus on whether European Central Bank President Mario Draghi will indicate that the bank is poised to taper its bond purchase program.
The number of Americans filing for unemployment benefits held at a 43-year low last week, pointing to sustained labor market strength that could pave the way for the Federal Reserve to raise interest rates in December.
Against this backdrop, the Committee decided to maintain the target range for the federal funds rate at 1/4 to 1/2%. The Committee judges that the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives. The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2% inflation.
San Francisco Federal Reserve Bank President John Williams on Thursday joined a growing chorus of his colleagues signaling support for a U.S. interest rate hike in coming months, saying that waiting too long could be costly for the economy.
The U.S. Federal Reserve has pulled back its forecasts of tighter monetary actions as the global economy is slowing down much faster than anticipated. Economic shocks in China and the continuing saga of the Brexit vote have put pressure on other central banks to act to avoid the pull of deflation of their economies.
Friday’s incredibly impressive U.S. jobs report sent the U.S. dollar and equities higher, with S&P 500 and Nasdaq ending the week at new record highs. The 255,000 jobs added in July and 292,000 in June, made the markets look beyond the weak release in May of only 24,000 additional jobs.