U.S. Dollar Firms After Fed Policy Minutes
The United States U.S. dollar firmed against its major trading partners early Thursday, still riding the boost from the hawkish Federal Open Market Committee meeting minutes released Wednesday afternoon.
The minutes of the FOMC’s Dec. 14-15 meeting noted that “it may become warranted to increase the federal funds rate sooner or at a faster pace than participants had earlier anticipated” to fight inflation and suggested an earlier start to a reduction in holdings on the balance sheet.
Initial jobless claims are expected to decline further in the Jan. 1 holiday week when they are released, while the December ISM services reading is expected to slip. The trade gap and factory order data for November and weekly natural gas stocks will also be released Thursday.
Earlier, Challenger reported that layoff intentions rose modestly in December from a 28-year low in November but were down sharply from a year earlier. Challenger said layoffs are likely to remain low as companies find it hard to hire skilled workers.
Total layoffs for 2021 were a record low after the pandemic-related surge in 2020. Markets are looking ahead to Friday’s employment report for December while keeping their focus on the rising COVID-19 cases are that expected throughout January.
A quick summary of foreign exchange action heading into Thursday shows that USD-CAD rose to 1.2774 from 1.2753 at the Wednesday US close and from 1.2722 a day ago, with most of the gain coming after the release of the minutes.
Canada reports its monthly trade balance, at the same time as the release of the US trade data. As with the US, the highlight of this week’s Canadian data schedule is the employment report for December scheduled to be released on Friday.
USD-JPY fell back to 115.7936 from 116.1025 at the Wednesday US close but up from 115.7095. The pair climbed as high as 116.1731 after the minutes but fell back overnight after Japan’s service Purchasing Managers’ Index for December was revised up from the flash estimate.
The PMI was still below the November level. With stricter COVID-19 lockdowns in place, growth forecasts for Japan are being revised lower for the near term.
GBP-USD fell back slightly to 1.3540 from 1.3557 at the Wednesday US close and down from a peak of 1.3595 right before the release of the FOMC minutes.
The pair is virtually unchanged from the same point a day ago. The UK’s December services PMI was revised higher from the flash estimate earlier Thursday, helping the pair to partially recover, though the index remained well below the November level.
EUR-USD ticked up to 1.1315 from 1.1313 at the Wednesday US close, down only slightly from 1.1317 a day ago. Eurozone producer prices grew faster than expected in November, but the pace slowed considerably from the October pace.
EU data on consumer confidence and inflation, retail sales and business sentiment will be released on Friday. #U.S. Dollar Firms After Fed Policy Minutes
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