Economy
Dollar finds buyers as Fed flags hikes
|
The dollar was perched near a five-week high on Thursday, bolstered after Federal Reserve chair Jerome Powell primed investors for U.S. interest rate hikes beginning in March.
Overnight the Fed left policy unchanged but Powell foreshadowed a sustained battle to tame inflation.
He told reporters there was “quite a bit of room to raise interest rates without threatening the labour market” and said the Fed was of a mind to begin lifting rates in March.
The dollar leapt 0.7% against the yen in the wake of the Fed’s decision and Powell’s remarks, its steepest daily jump in more than two months as the prospect of imminent hikes spooked stock markets and drove bond yields higher.
The yen inched a fraction lower to 114.74 per dollar early in the Asia session.
The euro was also sold and fell about 0.5% overnight to a five-week low of $1.1235, holding at that level in Asia.
Sterling and the Australian dollars also dropped with the mood and the New Zealand dollar fell to its lowest since Nov. 2020.
“While communication from Fed members in the lead-up to this meeting meant that the pivot should not have been a surprise, risk appetite shrivelled as Powell’s press conference progressed and the extent of the Fed’s commitment to act in the face of significant inflation pressure became clear,” said ANZ analysts.
The Australian dollar fell close to its 2022 low in the overnight session before recovering a little to $0.7119. The kiwi posted a fifth consecutive daily loss to touch $0.6639. Both Antipodeans steadied in early trade. [AUD/]
Sterling is hovering at $1.3469 as investors await a Bank of England meeting next week and have an eye on the political turmoil enveloping Prime Minister Boris Johnson, who is under pressure after attending parties during lockdowns.
On Thursday, data showed New Zealand inflation a little hotter than forecast and running at a three-decade high.
Chinese industrial profits data is due later in the day, as well as U.S. economic growth and jobless claims figures.
After a battering last week, cryptocurrencies held their ground in the wake of the Fed’s meeting and bitcoin last bought $35,869.
========================================================
Currency bid prices at 0006 GMT
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Euro/Dollar
$1.1242 $1.1243 +0.00% -1.11% +1.1242 +1.1236
Dollar/Yen
114.7450 114.6800 +0.01% -0.28% +114.7700 +114.6900
Euro/Yen
129.00 128.91 +0.07% -1.02% +129.0100 +128.8600
Dollar/Swiss
0.9239 0.9243 -0.03% +1.30% +0.9243 +0.9240
Sterling/Dollar
1.3465 1.3465 +0.00% -0.44% +1.3467 +1.3465
Dollar/Canadian
1.2663 1.2663 +0.02% +0.17% +1.2670 +1.2659
Aussie/Dollar
0.7116 0.7115 +0.01% -2.10% +0.7121 +0.7113
NZ
Dollar/Dollar 0.6657 0.6654 +0.04% -2.75% +0.6660 +0.6646
All spots
Tokyo spots
Europe spots
Volatilities
Tokyo Forex market info from BOJ
(Reporting by Tom Westbrook. Editing by Lincoln Feast.)
Economy
U.S. economic growth for last quarter revised up slightly to healthy 3.4% annual rate
|
The U.S. economy grew at a solid 3.4 per cent annual pace from October through December, the government said Thursday in an upgrade from its previous estimate. The government had previously estimated that the economy expanded at a 3.2 per cent rate last quarter.
The Commerce Department’s revised measure of the nation’s gross domestic product – the total output of goods and services – confirmed that the economy decelerated from its sizzling 4.9 per cent rate of expansion in the July-September quarter.
But last quarter’s growth was still a solid performance, coming in the face of higher interest rates and powered by growing consumer spending, exports and business investment in buildings and software. It marked the sixth straight quarter in which the economy has grown at an annual rate above 2 per cent.
For all of 2023, the U.S. economy – the world’s biggest – grew 2.5 per cent, up from 1.9 per cent in 2022. In the current January-March quarter, the economy is believed to be growing at a slower but still decent 2.1 per cent annual rate, according to a forecasting model issued by the Federal Reserve Bank of Atlanta.
Thursday’s GDP report also suggested that inflation pressures were continuing to ease. The Federal Reserve’s favoured measure of prices – called the personal consumption expenditures price index – rose at a 1.8 per cent annual rate in the fourth quarter. That was down from 2.6 per cent in the third quarter, and it was the smallest rise since 2020, when COVID-19 triggered a recession and sent prices falling.
Stripping out volatile food and energy prices, so-called core inflation amounted to 2 per cent from October through December, unchanged from the third quarter.
The economy’s resilience over the past two years has repeatedly defied predictions that the ever-higher borrowing rates the Fed engineered to fight inflation would lead to waves of layoffs and probably a recession. Beginning in March 2022, the Fed jacked up its benchmark rate 11 times, to a 23-year high, making borrowing much more expensive for businesses and households.
Yet the economy has kept growing, and employers have kept hiring – at a robust average of 251,000 added jobs a month last year and 265,000 a month from December through February.
At the same time, inflation has steadily cooled: After peaking at 9.1 per cent in June 2022, it has dropped to 3.2 per cent, though it remains above the Fed’s 2 per cent target. The combination of sturdy growth and easing inflation has raised hopes that the Fed can manage to achieve a “soft landing” by fully conquering inflation without triggering a recession.
Thursday’s report was the Commerce Department’s third and final estimate of fourth-quarter GDP growth. It will release its first estimate of January-March growth on April 25.
Economy
Canadian economy starts the year on a rebound with 0.6 per cent growth in January – CBC.ca
The Canadian economy grew 0.6 per cent in January, the fastest growth rate in a year, while the economy likely expanded 0.4 per cent in February, Statistics Canada said Thursday.
The rate was higher than forecasted by economists, who were expecting GDP growth of 0.4 per cent in the month. December GDP was revised to a 0.1 per cent contraction from zero growth initially reported.
January’s rise, the fastest since the 0.7 per cent growth in January 2023, was helped by a rebound in educational services as public sector strikes ended in Quebec, Statistics Canada said.
“The more surprising news today was the advance estimate for February,” which suggested that underlying momentum in the economy accelerated further that month, wrote CIBC senior economist Andrew Grantham in a note.
Thursday’s data shows the Canadian economy started 2024 on a strong note after growth stalled in the second half of last year. GDP was flat or negative on a monthly basis in four of the last six months of 2023.
More time for BoC to assess
The strong rebound could allow the Bank of Canada more time to assess whether inflation is slowing sufficiently without risking a severe downturn, though the central bank has said it does not want to stay on hold longer than needed.
Because recent inflation figures have come in below the central bank’s expectations, “it appears that much of the growth we are seeing is coming from an easing of supply constraints rather than necessarily a pick-up in underlying demand,” wrote Grantham.
“As a result, we still see scope for a gradual reduction in interest rates starting in June.”
The central bank has maintained its key policy rate at a 22-year high of five per cent since July, but BoC governors in March agreed that conditions for rate cuts should materialize this year if the economy evolves in line with its projections.
The bank in January forecast a growth rate of 0.5 per cent in the first quarter, and Thursday’s data keeps the economy on a path of small growth in the first three months of 2024. The BoC will release new projections along with its rate announcement on April 10.
Growth in 18 out of 20 sectors
Growth in January was broad-based, with 18 of 20 sectors increasing in the month, StatsCan said. The agency said that real estate and the rental and leasing sectors grew for the third consecutive month, as activity at the offices of real estate agents and brokers drove the gain in January.
Overall, services-producing industries grew 0.7 per cent, while the goods-producing sector expanded 0.2 per cent.
In a preliminary estimate for February, StatsCan said GDP was likely up 0.4 per cent, helped by mining, quarrying, oil and gas extraction, manufacturing and the finance and insurance industries.
Economy
Yellen Sounds Alarm on China ‘Global Domination’ Industrial Push – Bloomberg
US Treasury Secretary Janet Yellen slammed China’s use of subsidies to give its manufacturers in key new industries a competitive advantage, at the cost of distorting the global economy, and said she plans to press China on the issue in an upcoming visit.
“There is no country in the world that subsidizes its preferred, or priority, industries as heavily as China does,” Yellen said in an interview with MSNBC Wednesday — highlighting “massive” aid to electric-car, battery and solar producers. “China’s desire is to really have global domination of these industries.”
-
Business24 hours ago
Trump’s media company ticker leads to fleeting windfall for some investors
-
Art24 hours ago
‘Eye-wounding erection’: UK public art that is loved or hated
-
Politics21 hours ago
Alberta Politics: UCP ahead of NDP by 15-points. Naheed Nenshi is the most well-known and well-liked NDP.
-
Sports22 hours ago
Here’s what we know about the allegations against Shohei Ohtani’s interpreter, Ippei Mizuhara
-
Investment23 hours ago
TFSA Magic: The Best $7000 Investment Moves for 2024
-
Media21 hours ago
Is the US media layoffs phenomenon the next housing crisis?
-
News21 hours ago
Canada to get ‘Renters’ Bill of Rights’: Justin Trudeau
-
Sports23 hours ago
NHL analyst gets absolutely roasted for ‘insanely rich’ take on Zach Hyman