The dollar is attempting to bounce back from early weakness against its major competitors Wednesday afternoon. Investor disappointment over the weak U.S. GDP report for the first quarter has weighed on the currency throughout the session. However, the Federal Reserve announced upon the conclusion of its 2-day policy meeting that it has voted to keep its benchmark interest rate at zero. Today’s Fed decision and statement was unanimous despite some recent comments from voting members that hinted at diverging views on whether to raise rates this summer.
Brutal winter weather hindered the pace of the U.S. recovery, prompting the Fed to hold off on a rate hike that once seemed imminent. All calendar references to a rate hike have been removed from the Fed’s accompanying statement, meaning that policy makers will not hike until they see sufficient improvement in the labor market and a sustained uptick in inflation.
“The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term,” the Fed said.
Therefore, a June rate hike is on the table, but seems unlikely barring signs of a dramatic second-quarter snapback.
While U.S. economic growth in the first three months of 2015 was expected to be weak due to the severe winter weather, the Commerce Department released a report on Wednesday showing that the gross domestic product increased by even less than anticipated.
The Commerce Department said U.S. GDP inched up by just 0.2 percent in the first quarter following the 2.2 percent growth seen in the fourth quarter. The modest uptick compared to economist estimates for an increase of about 1.0 percent.
With more home buyers than usual entering the competitive spring market, the National Association of Realtors released a report on Wednesday showing that pending home sales in the U.S. rose to their highest level in almost two years in March.
NAR said its pending home sales index climbed 1.1 percent to 108.6 in March from an upwardly revised 107.4 in February. Economists had been expecting the index to increase by about 1.0 percent.
The European Central Bank raised further the ceiling on emergency liquidity assistance for Greek banks amid lingering uncertainty regarding the government’s reform proposals, reports said Wednesday, citing sources.
The emergency funding cap was raised to EUR 76.9 billion from EUR 75.5 billion last week.
Under the ELA scheme, the Bank of Greece provides funding to the country’s solvent banks. The risk of lending lies with the Greek central bank and the loans under the scheme are costlier for banks.
The dollar sank to nearly a 2-month low of $1.1177 against the Euro Wednesday, following over a 2-week decline, but has climbed back to around $1.1090 after the Fed announcement.
Eurozone economic confidence weakened unexpectedly in April as Greece crisis started to dampen activity, a closely watched survey showed Wednesday. Meanwhile, bank lending grew for the first time in three years in March.
The economic sentiment index fell to 103.7 from 103.9, which was the highest score since July 2011, survey results published by the European Commission revealed. Economists had forecast the indicator to remain unchanged at 103.9 in April.
Lending to euro area households and firms increased for the first time in three years in March and money supply growth accelerated more-than-expected after the announcement of quantitative easing by the European Central Bank.
Bank lending rose 0.1 percent in March from the prior year, reversing a 0.1 percent fall in February. Adjusted for loan sales and securitization, credit to the private sector climbed 0.8 percent, following February’s 0.6 percent increase.
A measure of future economic activity in Eurozone rose for the fifth successive month in March, signaling sustained improvement in economic activity for the coming months, the Conference Board said Wednesday. The Conference Board Leading Economic Index for the euro area climbed 0.7 percent to 105.1, after a 0.6 percent rise in February.
German consumer prices increased for the third straight month to a 5-month high in April, preliminary data from Destatis showed Wednesday. Consumer prices rose 0.4 percent year-on-year in April, the fastest since November when prices grew 0.6 percent. Inflation also matched economists’ expectations. This was the third consecutive rise in prices.
The buck has bounced back to around $1.5410 against the pound sterling after the Fed statement, from a 2-month low of $1.5488.
U.K. retail sales are forecast to pick up next month after recording a slowdown in April, results of the Distributive Trades Survey from the Confederation of British Industry showed Wednesday. The retail sales balance fell to +12 percent from +18 percent in March. Economists had forecast it to rise to 25 percent.
U.K. house prices increased at the fastest pace since June 2014, the Nationwide Building Society reported Wednesday. House prices were up 1 percent in April from the prior month, the strongest growth since June 2014. Economists had forecast house price growth to rise marginally to 0.2 percent from 0.1 percent in March.
The greenback has rebounded to around Y119.030 against the Japanese Yen, after testing support around Y118.400.
The material has been provided by InstaForex Company – www.instaforex.com