Fed minutes signal no change to pace of policy tightening
Australian dollar tumbles as nation’s leadership in crisis
The dollar rallied for the first day in six as investors awaited a meeting of global central bankers after the Federal Reserve signaled no change to its pace of monetary policy tightening. U.S. equity futures were flat as European stocks gained and Asian shares fell.
The greenback climbed against most of its peers and Treasuries were steady after the Fed indicated in meeting minutes a readiness to increase rates again if the economy stays on track. Among the biggest currency losers were South Africa’s rand, which slumped after a tweet from U.S. President Donald Trump fueled speculation of possible sanctions against the country, and the Australian dollar, which is under pressure as Prime Minister Malcolm Turnbull fights to keep his leadership.
The euro briefly pared some losses after manufacturing and services data showed the region’s economy is still strong, but soon retraced the move. The Stoxx Europe 600 Index climbed, while futures for the S&P 500 Index were little changed as investors continued to weigh Trump’s legal woes. MSCI’s Asia Pacific Index declined, but stocks were mixed across that region, gaining in China and South Korea but falling in Hong Kong.
Central banks are once again in the spotlight as investors await comments from Fed chairman Jerome Powell later this week when he speaks at the meeting of policy makers in Jackson Hole, Wyoming. Familiar tensions remain in the background, however. Alongside Trump’s legal woes, traders must also digest the imposition of fresh tariffsbetween the U.S. and China in the midst of talks aimed at averting the worsening trade conflict.
“With economic data mostly cooperating with the Fed’s base message of continued rate increases driven by tight labor markets, above trend growth and bubbling inflation, it is unlikely that Powell will drastically stray from this message,” BNY Mellon senior global market strategist Marvin Loh said in a note. Powell may provide more details on the neutral rate, curve inversion and balance sheet process, Loh wrote.
Fed Rate Hike 'Quite Certain' in September, NAB's Tan Says
Elsewhere, commodities were under pressure in the face of the rising dollar, with gold also slumping on the outlook for higher American interest rates. Oil edged lower after surging on a U.S. government report that showed the biggest decline in crude inventories since late July.
Terminal users can read more in our Bloomberg Markets Live blog here.
Here are some key events coming up this week:
- Companies announcing earnings include Alibaba and China’s Bank of Communications.
- Central bankers gather at the Kansas City Fed’s annual Jackson Hole symposium, where Powell speaks Friday.
These are the main moves in markets:
- The Stoxx Europe 600 Index gained 0.2 percent as of 9:31 a.m. London time.
- Futures on the S&P 500 Index fell less than 0.05 percent.
- The U.K.’s FTSE 100 Index climbed 0.1 percent.
- Germany’s DAX Index declined 0.1 percent.
- The MSCI Emerging Market Index increased 0.1 percent.
- The MSCI Asia Pacific Index fell 0.3 percent, the first retreat in a week.
- The Bloomberg Dollar Spot Index jumped 0.4 percent, the first advance in more than a week.
- The euro decreased 0.4 percent to $1.1555, the first retreat in more than a week.
- The British pound sank 0.4 percent to $1.2862.
- The Japanese yen fell 0.2 percent to 110.79 per dollar, the weakest in a week.
- The yield on 10-year Treasuries was unchanged at 2.82 percent, the lowest in more than 12 weeks.
- Germany’s 10-year yield was unchanged at 0.34 percent.
- Britain’s 10-year yield dipped one basis point to 1.272 percent.
- Italy’s 10-year yield declined three basis points to 3.031 percent.
- West Texas Intermediate crude fell 0.3 percent to $67.68 a barrel, the first retreat in more than a week.
- Gold dipped 0.6 percent to $1,188.88 an ounce, the biggest decrease in more than a week.
— With assistance by Andreea Papuc, Adam Haigh, and Craig Torres