Stocks up, dollar sluggish ahead of Yellen testimony
THE DOLLAR was stuck near its lowest level in more than a year against the euro yesterday as stocks edged higher in light trading ahead of US Federal Reserve chairperson Janet Yellen’s testimony to Congress.
Although Yellen was expected to say the Fed intended to raise rates steadily, any signals on how the bank viewed a retreat in inflation and muted growth in wages would be closely watched.
Comments overnight from two of her colleagues calling for caution on further interest rate rises pushed back the probability of a hike again before the end of the year to 50%, according to the CME’s Fedwatch data.
“The Yellen testimony remains the key event risk in today’s session, but we remain optimistic about the dollar’s outlook, and putting on a long position against sterling is the best way to execute that view,” said Adam Cole, head of foreign exchange strategy at RBC Capital Markets in London.
Sterling hit a two-week low against the dollar and deepened a fall to its lowest in eight months against the euro yesterday after Bank of England deputy governor Ben Broadbent said he was not yet ready to raise interest rates.
The fall in sterling once again lifted the exporter-heavy UK blue-chip index, which rose 1%, outperforming regional peers.
European shares rose 0.8%, with all major sectors in the green.
US stocks took a brief tumble during Tuesday trading on Wall Street after emails disclosed that President Donald Trump’s eldest son welcomed help from a Russian lawyer for his father’s 2016 election campaign against Hillary Clinton.
But by the closing bell Wall Street shares had clawed back their losses.
The dollar, however, failed to recover after the damage suffered from the new twist in the Trump campaign’s alleged links with Russia.
The greenback was trading flat against a basket of major currencies and was hovering near its lowest since May against the euro.
Investors were also bracing for a move on interest rates at the Bank of Canada.
A Reuters poll forecast the bank would raise interest rates later in the day, which would be the first hike in seven years.
Goldman Sachs economists expected the bank to stand pat, citing in-line economic data and weak inflation.
In commodity markets, oil prices got a reprieve from worries about oversupply after the US government cut its crude production outlook for next year and as fuel inventories plunged.
Brent crude futures rose 1.3%, while US West Texas Intermediate crude futures were up 2%. – Reuters