United States interest rate rise in June '100% certain' after Fed delays

Saturday, 05 May, 2018

The change in the regulator's statement is key because it is believed that such a level of inflation is healthy and is a signal to continue the policy of raising interest rates.

The latest batch of earnings news is also likely to attract attention, with Avis Budget (CAR), Fitbit (FIT), Kraft Heinz (KHC), MetLife (MET), Tesla (TSLA) and Sprint (S) among the companies releasing their quarterly results after the close today's trading.

Treasury yields had risen overnight in the run-up to the refunding announcement.

"The description of the inflation target as "symmetric" could be interpreted as a sign that officials will tolerate inflation rising modestly above 2 percent over the coming months", Andrew Hunter, US Economist at Capital Economics, said in a note. The Indonesian Rupiah is showing a similar level of weakness to the Ringgit against the Dollar, which suggests that increased confidence that the Federal Reserve will raise U.S. interest rates in June is behind the currency moves.

By adding "symmetric" to the inflation target, Fed officials might indicate that they would allow inflation to exceed the 2-percent goal somewhat, according to some analysts.

The British pound and the euro traded lower. However, the market interpreted the statement as carrying a hawkish bias.

A USA trade delegation is expected to meet Chinese officials in Beijing on Thursday and Friday after weeks of tensions between the world's two largest economies.

Meanwhile, the major European markets all moved to the upside on the day. Apple's shares rose about 4 percent after the closing bell.

- The Stoxx Europe 600 Index advanced 0.6 percent. France's CAC 40 Index rose 0.2 percent, the UK's FTSE 100 Index rose 0.3 percent, while Germany's DAX index rallied 1.5 percent.

Meanwhile, Indonesia's benchmark Jakarta Composite Index is leading losses among Asian stock markets on Thursday.

This news did little to support the "Greenback", however, with investors instead favouring the New Zealand dollar (NZD) and the Australian dollar (AUD) in the meantime.

- The euro fell 0.4 percent to $1.1941.

The dollar held near a four-month high against a basket of major currencies on Wednesday, buoyed by the outlook for a strong US economy and rising yields amid signs of a slowdown elsewhere, especially in Europe.

The yields on 10-year government bond were initially rising, but then declined to 2.974%. While the Fed left interest rates unchanged on Wednesday, it is possibly set to raise them by a total of 75 basis points this year. Looking at US Treasury bond yields, the 10-year is now flat and yielding 2.973%.

- West Texas Intermediate crude gained 0.7 percent to $67.73 a barrel, the biggest gain in two weeks.

Spot gold last stood at Dollars 1,307.14.

- With assistance from Adam Haigh, Cecile Gutscher and Todd White.