• The U.S. dollar strengthened against the euro on Thursday after the Federal Reserve held rates steady as expected, and said strong jobs and spending kept the economy on track, setting up for a rate hike in December.
The central bank’s statement reflected little change in its outlook for the economy since the last policy meeting in September, with inflation remaining near its 2 percent target, unemployment falling and risks to the economic outlook appearing to be “roughly balanced.”
The dollar index .DXY, a gauge of its performance against six major peers traded at 96.63 on Friday, after clocking a gain of 0.66 percent on Thursday.
According to the CME group’s FedWatch tool, the likelihood of the Fed raising rates by another 25 basis points in December is 75 percent.
Meanwhile, the euro EUR= traded at $1.1366 on Friday, relatively unchanged in early Asian trade. The single currency fell 0.54 percent on Thursday as traders reacted to negative news out of Europe.
The European Commission forecast on Thursday that the Italian economy would grow more slowly in the next two years than Rome thinks, making government budget deficits much higher than assumed by Italy.
• FOMC KEY POINTS
The Federal Open Market Committee, as expected, unanimously approved keeping the federal funds rate in a range of 2 percent to 2.25 percent.
There was no mention of the volatility that has gripped financial markets since mid-October in the central bank’s statement.
The committee noted in the statement that the unemployment rate “has declined” since the September meeting.
The Labor Department last week reported that the headline jobless level was at 3.7 percent, the lowest since December 1969.
The statement noted that the “growth of business fixed investment has moderated from its rapid pace earlier in the year.”
• Volatility has gripped financial markets since mid-October, when Fed Chairman Jerome Powell made remarks that Wall Street took as hawkish for the pace of future rate hikes.
“Interest rates are still accommodative, but we’re gradually moving to a place where they will be neutral,” Powell said during an interview with PBS. “We may go past neutral, but we’re a long way from neutral at this point, probably.”
• The European Union wants a customs border in the Irish sea, between Northern Ireland and the rest of the United Kingdom, in the event of a no-deal Brexit, a letter from Theresa May seen by the London Times newspaper suggested.
In the letter May said she would never allow a divide between the province and Britain “to come into force”. The Times said this had been interpreted by the Democratic Unionist Party as a sign that the clause will be inserted into the legally binding agreement.
• Chinese President Xi Jinping is making peace with his country’s private companies.
That reassurance comes amid an environment in which privately owned enterprises have taken a hit from banks constricting lending in a national effort to rein in debt. On top of that, confidence has been shaken on concerns private firms were falling out of political favor in relation to their powerful state-owned brethren.
Now, facing trade war with the United States and a slowing economy, Xi is offering the sector an olive branch, which analysts and investors say is necessary to boost confidence in the critical job-providing sector.
• Half of Japanese companies expect new trade talks with Washington to boost their U.S.-bound exports, a Reuters poll found, despite President Donald Trump’s intensifying drive to cut the trade gap between the two major economies.
There are, however, concerns among more than half of the respondents that the talks, which Japan and the United States agreed to in September, will lead to higher U.S. tariffs and other restrictions on Japanese exports, the monthly poll showed.
After the U.S. midterm elections this week, Trump said trade was one area in which he hoped to work with Democrats, who won control of the House of Representatives. Trump also criticized Japan for not treating the United States fairly on trade.
• Oil prices fell nearly 2 percent on Thursday as investors focused on swelling global crude supply, which is increasing more quickly than many had expected.
The market focused on record U.S. crude production and signals from Iraq, Abu Dhabi and Indonesia that output will grow more quickly than expected in 2019. Fears of the potential supply glut dampened a rally early in the session driven by Chinese data that showed record oil imports.
Brent crude futures, the global benchmark, fell $1.42, or 1.97 percent, to settle at $70.65 a barrel, the lowest since mid-August. U.S. crude futures fell $1.00, or 1.6 percent, to $60.67a barrel, the lowest since March 14.
In post-settlement trade, both contracts extended losses.
• China’s crude imports rose to 9.61 million barrels per day (bpd) in October, up 32 percent from a year earlier, customs data showed.
Reference: Reuters, CNBC
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