The US dollar was moderately higher against major currencies after it reached new lows yesterday, nevertheless, under pressure after the FOMC minutes. The minutes reported that the leaders of the Central Bank tried to leave the door open for a rate hike. They also tried to come to a unified assessment of prospects for the economy. In general, reports signaled that rates could be raised as early as September, but the Central Bank will not act as long as the majority of its leaders will not come to a consensus regarding the outlook for the economy, employment and inflation. According to the futures market, the probability of a Fed rate hike is 18% in September and at the December meeting is estimated at 42.8% versus 41.7%.
Also yesterday yesterday the president of the Federal Reserve Bank of San Francisco John Williams said the central bank should start raising interest sooner rather than later. With this statement, Williams joined the growing number of Fed leaders who believe that the economy is strong enough to withstand higher borrowing costs, as well as the fear of exceeding the inflation target set by the Fed.
“In the context of a strong domestic economy with good momentum, it makes sense to start a gradual increase in interest rates, preferably – sooner rather than later,” – said Williams.
Next week, Fed Chairman Janet Yellen will deliver a speech at the annual conference of the central bank in Jackson Hole. Investors will be closely watching for hints of further Fed action with respect to monetary policy.
The yen has weakened slightly since the beginning of the session, but the USD / JPY pair has no clear direction because of the lack of new signals.
Activity index for large enterprises of all industries of Japan increased by 1.0% in June, after falling 1.0% in May. Analysts had expected an increase of 0.9%. This indicator estimates the capital costs of all sectors except the Japanese financial industry and is considered a leading growth performance.
The New Zealand Dollar was down against the US dollar: “The key factor determining the dynamics of the New Zealand dollar, are the prospects for US monetary policy, while the RBNZ policy has no significant impact on the prospects for the New Zealand currency” – say BNZ.
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