CURRENCIES: Dollar Index Lingers Around 1-week Low As Central Banks Take Center Stage
December 14 2017 - 5:38AM
Dow Jones News
By Sara Sjolin, MarketWatch
ECB, Bank of England decisions due Thursday
The dollar struggled for direction Thursday, as traders weighed
a downbeat inflation outlook from the Federal Reserve up against
what could come out of the European Central Bank and Bank of
England decisions later in the day.
What are currencies doing?
The ICE U.S. Dollar Index was marginally higher at 93.468,
struggling to recover from a 0.7% loss on Wednesday when the
benchmark declined to a one-week low.
The pound rose to $1.3449 from $1.3419 late Wednesday in New
York, trading around its highest level since Friday.
The euro slipped to $1.1822 from $1.1827 on Wednesday.
The yen declined, with the greenback buying Yen112.79, rising
from Yen112.54 recorded late Wednesday in New York.
The Swiss franc declined against all other major currencies
after the country's central bank kept its ultra-loose monetary
policy in place, leaving the deposit rate at negative 0.75%
(http://www.marketwatch.com/story/swiss-national-bank-holds-key-rate-at-minus-075-2017-12-14).
The franc dropped to $1.0126, down from $1.0149 on Wednesday.
The Norwegian krone soared after Norges Bank said that it
expects to lift rates "somewhat earlier" than it had expected in
September. A dollar fetched 8.2282 kroner, down from 8.3253 on
Wednesday.
Read:The Game of Krones: Inside Denmark's battle to defend its
35-year-old currency peg
(http://www.marketwatch.com/story/the-game-of-krones-inside-denmarks-battle-to-defend-its-35-year-old-currency-peg-2017-12-08)
What's driving markets?
The dollar was still struggling to shake off weakness from
Wednesday when the Fed, in a widely expected move, raised rates for
the third time this year, but also suggested inflation will
continue to be sluggish in 2018. Persistently weak inflation has
been a major concern for the U.S. central bank as in indicates
wages aren't rising fast enough.
Read:Inflation outlook still baffles the Fed
(http://www.marketwatch.com/story/inflation-outlook-still-baffles-the-fed-2017-12-13)
The pound advanced ahead of the Bank of England's decision on
interest rates, due at noon London time, or 7 a.m. Eastern Time.
But after raising rates for the first time in a decade in November,
the BOE is widely expected to stand pat Thursday.
Read: What analysts are looking for in Thursday's Bank of
England meeting
(http://www.marketwatch.com/story/what-analysts-are-looking-for-in-thursdays-bank-of-england-meeting-2017-12-12)
Sterling investors also assessed the defeat for the government's
Brexit bill
(http://www.marketwatch.com/story/rebels-give-uk-lawmakers-the-power-to-reject-mays-final-brexit-deal-2017-12-14)
in a vote late Wednesday. The setback for British Prime Minister
Theresa May is seen as potentially opening the way to a softer U.K.
exit from the European Union.
Capping off a busy week in central bank news, the ECB is slated
to announce its latest policy decision at 12:45 p.m. London time,
or 7:45 a.m. Eastern Time. ECB President Mario Draghi will hold a
press conference at 1:30 p.m. London time, or 8:30 a.m.
Eastern.
Read:3 things to watch for at Thursday's ECB meeting
(http://www.marketwatch.com/story/3-things-to-watch-for-at-thursdays-ecb-meeting-2017-12-13)
The ECB is also widely expected to stand pat, but traders will
look for more signals on interest rates, staff projections for
economic growth and inflation and whether the bank's stimulus
measures will be further tapered after September 2018. The central
bank in October
(http://blogs.marketwatch.com/thetell/2017/10/26/live-blog-ecb-to-begin-tapering-its-massive-bond-buying-program-in-january/)
said it would halve its aggressive bond-buying program to EUR30
billion from EUR60 billion starting next month.
What are strategists saying?
"The outlook for the dollar has taken a hit over the past 24
hours and now seems to be at a near term crossroads and inflation
could be the driver... The market could now question whether the
Fed can tighten as the pace it is doing, and certainly not
quicker," said Richard Perry, analyst at Hantec Markets, in a
note.
"This morning there is a degree of settling down and traders
seem to be at a bit of a crossroads now. It will be interesting to
see the reaction of the market as to whether this is seen as a
minor blip in the dollar strength or something that becomes a
problem for the dollar bulls. As ever the reaction on the bond
yields will be telling," he added.
What economic data are due?
A report on retail sales for November is due at 8:30 a.m.
Eastern time, with import prices for the same month due at the same
time. Economists polled by MarketWatch expect, on average, retail
sales to rise 0.4%.
At 9:45 a.m. Eastern, the flash Markit manufacturing and
services purchasing managers indexes for December will be released.
Those will be followed by business inventories for October at 10
a.m. Eastern.
See MarketWatch's Economic Calendar
(http://www.marketwatch.com/economy-politics/calendars/economic)
(END) Dow Jones Newswires
December 14, 2017 05:23 ET (10:23 GMT)
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