· The dollar trimmed losses against a basket of major currencies on Wednesday, after data showed an uptick in underlying inflation as well as a surprise rise in retail sales last month, cementing expectations for an interest rate hike in December.
· “On the whole, it was generally a decent slew of data,” said Mazen Issa, senior FX strategist at TD Securities in New York.
“Underlying inflation seems to have stabilized for now and data has improved. I think that is enough for the Fed to deliver a hike next month,” he said.
Mazen, however, warned that upside for the dollar may be capped from here, barring a boost from the passage of the U.S. tax bill.
· The dollar index .DXY, which measures the greenback against six rival currencies, was down 0.03 percent at 93.801. Before the release of the data, the index was down 0.3 percent on the day.
The euro was down 0.02 percent at $1.1794 against the greenback, after earlier rising as high as $1.186.
· Underlying U.S. consumer prices increased in October on the back of a pickup in rents and healthcare costs, bolstering the view that a recent disinflationary trend worrying the Federal Reserve probably had ended.
October’s gain in the so-called core CPI, which measures underlying inflation pressures, could comfort Fed officials concerned that stubbornly low inflation may reflect not only temporary factors but also more persistent developments.
The broad-based advance in October sales and a stronger hand-off from an upwardly revised September show American consumers will continue to fuel the economy in the fourth quarter. Steady hiring, rising asset values and limited inflation are underpinning consumer spending.
· Falling unemployment and sustained growth mean the U.S. economy has accelerated beyond a sustainable level so the Federal Reserve should continue to raise interest rates, including next month, a veteran Fed policymaker said on Wednesday.
Boston Fed President Eric Rosengren, whose recently hawkish views have reflected the U.S. central bank’s policy tightening over the last year, said “temporary factors” are behind the below-target inflation readings.
· A Senate Republican tax plan that would repeal the Obamacare mandate and give permanent tax cuts only to U.S. corporations drew fire from two Republican lawmakers on Wednesday in what could be a sign of trouble for the sweeping measure.
Republican Senator Ron Johnson of Wisconsin said he would not support the current Senator proposal, or a separate tax bill being debated in the House of Representatives, because he believes they unfairly benefit corporations over other kinds of enterprises, including small businesses.
Senator Susan Collins, one of three Republicans who opposed a Republican Obamacare repeal effort earlier this year, warned that some middle-income taxpayers could see tax cuts wiped out by higher health insurance premiums if the repeal of the Affordable Care Act’s mandate goes through.
Their views could signal problems for Senate Republicans, who want to pass tax legislation by December but can afford to lose no more than two votes from their ranks because they have only a 52-48 majority in the Senate. Democrats have called the Republican tax plans a giveaway to the rich and corporations.
· Two senior U.S. senators asked Secretary of State Rex Tillerson on Wednesday to explain “questionable management practices” at his department that they believe are weakening the country’s diplomatic power, adding to a chorus of concern in Congress.
Republican Senator John McCain and Democratic Senator Jeanne Shaheen delivered a letter to Tillerson asking him to begin consulting with lawmakers on decisions that have an impact on recruiting, retaining and staffing the State Department, removing a hiring freeze and resuming promotions.
· States and local governments face additional revenue risks under U.S. House and Senate Republican tax reform bills from a potential loss of a federal subsidy and increases in standard taxpayer deductions that would cut cash to some state coffers.
Now, the U.S. House of Representatives bill, which was unveiled Nov. 2, could knock out a federal subsidy applied to billions of dollars of bonds sold by states and local governments in the aftermath of the Great Recession, analysts said on Wednesday.
· British Prime Minister Theresa May withstood new attempts to force concessions on her blueprint for leaving the European Union on Wednesday, the second day of a parliamentary debate that is deepening divisions over Brexit.
May has been weakened by losing the Conservative Party’s majority in a June election and faces hostility from many lawmakers, including some Conservatives, to various parts of the EU withdrawal bill which requires parliamentary approval.
All attempts to amend the bill, on severing ties with the EU, have been voted down so far, but a debate next month on precisely when Britain should leave, and whether a time should be set at all, is be to test her authority.
· Oil prices fell for a fourth session on Wednesday after the U.S. government reported an unexpected increase in crude and gasoline stockpiles, but an increase in refining runs and a drawdown in distillates helped prices bounce off session lows.
U.S. West Texas Intermediate (WTI) crude CLc1 was trading at $55.42 per barrel, down 32 cents, as of 1:19 p.m. EST (1819 GMT). Brent crude futures LCOc1 were down 19 cents at $62.02 a barrel, having fallen by 1.5 percent on Tuesday, its largest one-day drop in a month.
Reference: Reuters, Bloomberg
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