The dollar is losing ground against all of its major competitors Thursday afternoon, following the release of the minutes from the most recent policy meeting of the Federal Reserve.
Downside risks to economic growth prevented the Federal Reserve from raising interest rates in September, the minutes confirmed Friday. Most officials decided it would be “prudent” to wait for signs that problems overseas, especially in China, would dissipate. The Fed voted 9 to 1 to hold rates steady.
Members were also concerned about anemic inflation, which remains well below the Fed’s 2 percent annual target rate.
The Fed said it will consider raising interest rates before year’s end, as policy makers “agreed that developments over the inter-meeting period had not materially altered the committee’s economic outlook.”
However, the meeting took place September 16-17, a few weeks before the release of a disappointing jobs report.
After reporting modest increases in first-time claims for U.S. unemployment benefits in the two previous weeks, the Labor Department released a report on Thursday showing that initial jobless claims pulled back by more than expected in the week ended October 3rd.
The report said initial jobless claims fell to 263,000, a decrease of 13,000 from the previous week’s revised level of 276,000. Economists had expected jobless claims to dip to 271,000 from the 277,000 originally reported for the previous week.
Downside risks to the euro area growth and inflation outlook, mainly those from the slowdown in emerging economies and the volatility in forex markets, has “clearly increased”, while it was too early to conclude that they will have a lasting impact, the minutes of the European Central Bank Governing Council rate-setting session, held on September 2-3 showed Thursday.
“There was broad agreement that the overall economic situation in the euro area had become more challenging since before the summer,” the minutes said. Yet, the revisions to the outlook did not fundamentally alter the assessment of an ongoing moderate recovery and a gradual increase in inflation over the coming years.
“There was wide agreement that, while recent market volatility was a sign of increased risk and heightened uncertainty over the economic outlook, it was too early to form a sound judgment on whether such developments would have a lasting impact on euro area economic developments and, in particular, the medium-term outlook for inflation,” the minutes said.
France’s third quarter growth may be less than earlier estimated as industrial production was sluggish, while construction activity stagnated, the Bank of France said Thursday. In its final estimate for the third quarter, the central bank lowered its growth projection to 0.2 percent from 0.3 percent.
The French economy stagnated in the second quarter, defying the bank’s estimate of 0.2 percent growth. First quarter growth was 0.7 percent.
The dollar began Thursday’s session around $1.1240 against the Euro, but has dropped to a 2-week low of $1.1316 after the release of the Fed minutes.
Germany’s exports declined most in more than six years in August, suggesting that a slowdown in emerging economies, especially China hurts global demand.
Exports plunged a seasonally adjusted 5.2 percent month-on-month in August, reversing a 2.2 percent rise in July, data from Destatis revealed Thursday. This was the biggest decline since January 2009, when it slid 6.9 percent.
At the same time, imports dropped 3.1 percent, in contrast to a 2.3 percent rise seen a month ago.
The Bank of England decided to maintain its key interest rate unchanged at a record low in a split vote as Ian McCafferty went against majority for the third straight meeting.
In the meeting ended October 6, the Monetary Policy Committee voted 8-1 to hold interest rate at 0.50 percent, the bank said in a statement on Thursday, as seen in August and September.
The majority of members judged that the current stance of monetary policy remained appropriate, while McCafferty preferred a quarter-point hike.
BoE policymakers unanimously decided to maintain the stock of purchased assets financed by the issuance of central bank reserves at GBP 375 billion.
On inflation outlook, the bank said it was likely to remain close to zero before picking up around the turn of the year. But it now appeared likely to remain below 1 percent until Spring 2016, it added.
The greenback has fallen to $1.5365 against the pound sterling this afternoon, from around $1.5260 this morning.
British house price growth slowed unexpectedly in September, latest survey from the Royal Institution of Chartered Surveyors showed on Thursday. The survey showed that monthly house price balance fell to +44 in September from +53 in August, which was the highest in more than a year. Economists had expected the balance to rise again to +55.
Permanent job placements in the U.K. increased at the slowest pace in two-and-a-half years in September, the Report on Jobs compiled by the Recruitment and Employment Confederation and KPMG showed Thursday.
The number of people placed in permanent jobs continued to increase in September, but the rate of expansion eased to a two-and-a-half year low.
Japan’s economy is likely to continue its moderate recovery in the coming months and risks to the outlook include the slowdown in emerging markets and Europe as well as the pace of recovery in the U.S., the Bank of Japan said in its monthly report on Thursday.
Exports are expected to remain largely flat in the near term, but are seen rising moderately once emerging markets emerge from their weakening phase, the bank said.
The buck has slipped to around Y119.730 Thursday afternoon, from an early high of Y120.107.
A measure of peoples’ assessment of the Japanese economy decreased more-than-expected in September to the lowest level in eight months, survey figures from the Cabinet Office showed Thursday. The current index of Economy Watchers’ survey fell by 1.8 points to 47.5 in September from 49.3 in the previous month. Economists had expected the index to drop slightly to 49.0.
The material has been provided by InstaForex Company – www.instaforex.com