Dollar ticks higher before Fed rate call

A broadly positive outlook for the US economy, along with easing geopolitical and trade worries, has helped to lift the US dollar
AFP

London (AFP) – The dollar traded close to its 2018 highs on Wednesday shortly before a Federal Reserve rates announcement, having overcome an early bout of weakness against its main rivals.

As a two-day US central bank meeting was set to wind down, markets expected the Fed to leave its monetary policy unchanged, but rates are widely anticipated to start rising soon, dealers said.

The Fed’s upcoming statement “will likely be closely scrutinized as the markets try to gauge how many more rate hikes are in the offing this year”, brokers Charles Schwab said in a note.

Payrolls firm ADP reported Wednesday that job creation among private companies in the US, although robust, fell short of expectations in April, further strengthening the case for steady rates.

Higher US interest rates would make holding dollars more attractive to investors.

Eurozone stock markets, meanwhile, closed mostly higher as they caught up after Tuesday’s May Day closures, with Frankfurt largely outperforming its peers.

“It has been a good day for European stocks, most notably the German DAX index,” said Fawad Razaqzada, a market analyst at Forex.com.

Wall Street was soft overall in morning business, but Apple results delighted investors who pushed the phone maker’s stock sharply higher.

“Strong demand for iPhones and a massive share repurchase plan put to bed fears of a disappointing quarter from Apple,” said Jasper Lawler, head of research at London Capital Group.

Apple reported a hefty jump in second-quarter earnings and unveiled a $100-billion share buyback plan, while boss Tim Cook said he was optimistic about the outlook.

– Watching China –

Traders were also keeping tabs on trade developments as a high-level US delegation heads to China this week for talks.

The meetings come after US President Donald Trump on Monday decided to extend exemptions for the European Union, Canada and Mexico from steel and aluminium tariffs announced in March.

Attention is on also Trump’s May 12 deadline for deciding on whether to scrap a nuclear deal with Iran.

“The Iran sanctions deal issue has not gone away because what the president does about the deal is still a potential flashpoint,” said Greg McKenna, an analyst at AxiTrader.

“My sense is he’ll renegotiate or seek to. And I’m not sure that’s enough to drive (oil) prices up and through the recent range highs.”

Oil futures were mixed in late European trading after a strong rise in US inventory and production data.

– Key figures around 1540 GMT – 

London – FTSE 100: UP 0.3 percent at 7,543.20 points (close)

Frankfurt – DAX 30: UP 1.5 percent at 12,802.25 (close)

Paris – CAC 40: UP 0.2 percent at 5,529.22 (close)

EURO STOXX 50: UP 0.5 percent at 3,556.54

New York – Dow: DOWN 0.2 percent at 24,070.40

Tokyo – Nikkei 225: DOWN 0.2 percent at 22,472.78 (close) 

Hong Kong – Hang Seng: DOWN 0.3 at 30,723.88 (close)

Shanghai – Composite: FLAT at 3,081.18 (close)

Euro/dollar: DOWN at $1.1968 from $1.1993 at 2100 GMT

Pound/dollar: DOWN at $1.3604 from $1.3617 

Dollar/yen: UP at 109.92 yen from 109.87

Oil – Brent North Sea: DOWN 19 cents at $72.94 per barrel 

Oil – West Texas Intermediate: UP 19 cents at $67.44

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