Greenback Plunges as Fed Comments Weigh on Sentiment
The US dollar declined sharply against a basket of currencies Thursday as the prospect of a rate increase in the short-term diminished following the latest Federal Open Market Committee policy meetings.
The US dollar index, a broad performance measure of the greenback’s strength versus six commonly traded peers, declined 0.41 percent to 80.25. The index, which tracks the dollar’s performance against the Japanese yen, euro, British pound, Canadian dollar, Swedish krona and Swiss franc, is on pace for a weekly decline of around 0.4 percent.
On Wednesday the Federal Reserve indicated it would keep interest rates at record lows after Chair Janet Yellen dismissed latest inflation data as “noisy.” The markets were prepared for a more hawkish stance from the central bank in light of rising inflation and an improved labour market. Instead, the Fed barely increased its forecast of inflation and said it expects long-run interest rates to run below the historical average of 4 percent.
US consumer prices increased 0.4 percent in May, which translates into a 2.1 percent gain over the past 12 months. The annual rate was roughly in line with the central bank’s target for inflation.
The Fed pared back the pace of asset purchasing by $10 billion to $35 billion and kept the overnight rate at 0.25 percent, as expected. The central bank validated its decision to rein in record stimulus by citing an improving labour market. US employers added 217,000 nonfarm payrolls in May, pushing up the three month average to 234,000.
In economic data, US jobless claims declined 6,000 to 312,000 in the week ended June 14, the Labor Department reported today in Washington. The bigger than forecast decline shifted the four-week moving average from 315,500 ro 311,750.
The Conference Board’s leading indicator, a gauge of future trends in the US economy, advanced 0.5 percent in May, narrowly missing estimates for 0.6 percent.
The USDJPY declined 0.08 percent to 101.85, recovering from an intraday low of 101.75. The daily chart shows initial support at 101.56 and resistance at 102.24, right around the 100-day average.
The euro had a strong day against its US counterpart, as the EURUSD advanced to an intraday high of 1.3643. The pair consolidated at 1.3622, climbing 0.25 percent. The daily chart points to support at 1.3558 and resistance at 1.3638.
The British pound set a nearly six-year high against the US dollar, as the GBPUSD advanced to an intraday high of 1.7062. The pair later consolidated at 1.7042, advancing 0.3 percent. Initial support is likely found at 1.6941 and resistance at 1.7057.
The USDCAD edged lower, declining 0.08 percent to 1.0827. The pair is supported at 1.0813. Resistance is likely found at 1.0878.
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