ZCZC
BCN-10
EUROPE-MARKETS
Dollar drops before Fed chief speech
LONDON, Aug 25, 2018 (BSS/AFP) – Stocks pushed higher following a speech
on Friday by the head of the Federal Reserve that signalled the US economy
remained strong, but the dollar slid as traders questioned the pace of
interest rate hikes.
Speaking at the annual gathering of global central bankers in Jackson
Hole, Wyoming Jerome Powell said that the US economy remained strong and
anyone who wanted a job could find one.
Meanwhile on inflation, he said: “We have seen no clear sign of an
acceleration above two percent, and there does not seem to be an elevated
risk of overheating.”
Markets have been concerned that with the US unemployment rate at near
record lows and employers having more and more difficulty finding workers
that a wages might finally start rising quickly, causing a spurt of inflation
that would push the Fed into hiking interest rates more quickly.
“Jerome Powell hit the dollar with a fairly dovish set of remarks at
Jackson Hole,” said Neil Wilson, chief market analyst for Markets.com in a
note to clients.
He said Powell’s speech indicated that Fed was flexible and didn’t want to
choke off growth by raising rates too fast.
“The implication is that the Fed won’t be seeking to pre-emptively hike
rates and the outlook for 2019 hikes now becomes more complicated.”
As the US economy has recovered, the Fed has raised the benchmark lending
rate seven times since December 2015, twice this year under Powell, and is
expected to hike again in September and December.
The dollar, which had already been trading lower against the euro and
pound, fell further after Powell’s comments.
US stocks rose, with the Dow gaining 0.5 percent in late morning trading.
In Europe, London, Frankfurt and Paris all ended the day 0.2 percent
higher.
Australia’s dollar meanwhile pared losses and Sydney’s stock market
closely slightly higher after the country’s governing Liberal Party elected a
new business-friendly prime minister, ending a week of political uncertainty.
Sydney’s under-pressure S&P/ASX 200 fluctuated through the day and ended
up 0.1 percent after the Liberals elected Scott Morrison as prime minister.
The former treasurer took the reins after beating hardliner Peter Dutton,
who had moved to replace Malcolm Turnbull in a shock revolt earlier this week
that sent Australian markets spinning.
BSS/AFP/HR/0945