Dollar Drops as Powell Set for Fed Nod; Bonds Slip

Forex Weekly Outlook October 31-November 4
  • Dollar Drops as Powell Set for Fed Nod; Bonds Slip

The dollar declined and Treasury yields steadied as investors digested news that President Donald Trump is poised to name Jerome Powell to lead the Federal Reserve. European stocks drifted, the euro rose and bonds in the region nudged lower.

The Stoxx Europe 600 was little changed even as data showed euro-area manufacturing is expanding at one of the fastest rates since the start of the millennium. Real estate stocks and banks outperformed and travel and technology shares lagged. Asian stocks were mixed as a rally that drove prices to the highest level in 10 years showed signs of tiring. Sterling slipped ahead of Thursday’s Bank of England meeting, where policy makers are expected to raise interest rates for the first time in more than a decade. Oil erased a loss to trade above $54 a barrel. Industrial metals pared some of yesterday’s rally.

Trump will nominate Fed Governor Powell to the top job at the U.S. central bank on Thursday at 3 p.m. Washington time, according to four people familiar with the decision. Powell is seen by investors as a continuity candidate and has generally backed current chair Janet Yellen’s cautious approach to withdrawing stimulus. The succession question overshadowed the Fed’s policy statement Wednesday, where it subtly upgraded its assessment of the economy and reinforced expectations of a December interest-rate hike.

The progress toward American tax reform is also on most investors’ radars, alongside corporate earnings and Friday’s U.S. jobs report. There have been conflicting reports about when and how the U.S. tax rate on companies would be lowered. House Republican leaders plan to unveil a bill Thursday that would cut the corporate tax rate to 20 percent — though it may not stay there.

Elsewhere, bitcoin extended gains for the fourth consecutive day, hitting $7,000 to establish a fresh record.

These are the main moves in markets:

Stocks

  • The Stoxx Europe 600 Index declined 0.1 percent as of 10:23 a.m. London time.
  • The U.K.’s FTSE 100 Index climbed 0.1 percent.
  • Germany’s DAX Index fell 0.2 percent.
  • Japan’s Nikkei 225 Stock Average climbed 0.5 percent to the highest in more than 21 years.
  • The MSCI Asia Pacific Index jumped 0.2 percent to the highest in about 10 years.
  • The MSCI Emerging Market Index increased less than 0.05 percent to the highest in more than two weeks.
  • Futures on the S&P 500 Index fell 0.1 percent.

Currencies

  • The Bloomberg Dollar Spot Index decreased 0.2 percent.
  • The euro climbed 0.2 percent to $1.1644.
  • The British pound dipped 0.1 percent to $1.3236.
  • The Japanese yen gained 0.1 percent to 114.09 per dollar.

Bonds

  • The yield on 10-year Treasuries increased less than one basis point to 2.38 percent.
  • Germany’s 10-year yield rose two basis points to 0.39 percent, the highest in a week.
  • Britain’s 10-year yield climbed two basis points to 1.363 percent, the highest in a week.
  • Japan’s 10-year yield declined one basis point to 0.055 percent, the lowest in four weeks.

Commodities

  • West Texas Intermediate crude rose 0.1 percent to $54.36 a barrel.
  • Gold increased 0.1 percent to $1,276.01 an ounce.
  • Copper fell 0.7 percent to $3.12 a pound.

About the Author

Samed Olukoya
CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade long experience in the global financial market. Contact Samed on Twitter: @sameolukoya; Email: [email protected]

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