The U.S. dollar spiked up against its major rivals in European deals on Thursday, as investors focus on the possibility of monetary policy divergence between the Federal Reserve and the European Central Bank.
Market participants are speculating further cut in deposit rate and expansion of quantitative easing at the ECB meet ending today, which would put downward pressure on the euro exchange rate.
The Fed Chair Janet Yellen sounded hawkish on Wednesday, signaling the central bank is on track to raise interest rates at its December 15-16 meeting. Yellen will likely expound upon her assessment of the economy in testimony before Congress at 10:00 am ET.
The dollar was underpinned on the prospectus of higher rates in the U.S., which would yield higher returns to investors.
The U.S. treasury yields also picked up, with the yield on benchmark 10-year note up by 2.19 percent, while that of 2-year note rose 0.94 percent.
The dollar was broadly higher in Asian deals, as Yellen heightened expectations for a Fed rate hike this month.
In European trading, the greenback climbed to 1.0247 against the Swiss franc, compared to 1.0182 hit late New York Wednesday. On the upside, the greenback may challenge resistance around the 1.04 zone.
The greenback that ended Wednesday’s trading at 123.24 against the Japanese yen edged up to 123.56. If the greenback-yen pair extends rise, 124.5 is possibly seen as its next resistance level.
The services sector in Japan continued to expand in November, albeit at a slower rate, with a PMI score of 51.6, according to the latest survey from Nikkei.
That’s down from 52.2 in October, although it remains well above the boom-or-bust line of 50 that separates expansion from contraction.
Reversing from an early low of 1.0618 against the euro, the greenback advanced to 1.0552. The greenback is seen finding resistance around the 1.04 region.
Final data from Markit showed that Eurozone private sector growth accelerated at a slightly slower than initially estimated pace in November.
The final composite output index rose to 54.2 in November from 53.9 in October, to stay above the no-change mark of 50.0 for the twenty-ninth successive month. It was below the flash score of 54.4.
The greenback reached as high as 1.4904 against the pound, although it stablised shortly thereafter. The pound-greenback pair ended Wednesday’s trading at 1.4950.
Survey figures from Markit Economics showed that the U.K. service sector activity expanded at the fastest pace in four months in November.
The Chartered Institute of Procurement & Supply/Markit services Purchasing Managers’ Index rose more-than-expected to 55.9 in November from 54.9 in the previous month. Economists had expected the index to increase slightly to 55.0.
Looking ahead, the European Central bank will announce its interest rate decision at 7:45 am ET. Economists expect the bank to keep its interest rates unchanged at 0.05 percent.
Following the announcement, European Central Bank President Mario Draghi will hold the customary post-meeting press conference at 8:30 am ET.
In the New York session, U.S. weekly jobless claims for the week ended November 28, U.S. Markit’s services PMI for November, U.S. factory orders and durable goods orders, both for October and U.S. ISM non-manufacturing composite PMI for November are slated for release.
At 8:40 am ET, Federal Reserve Bank of Cleveland President Loretta Mester gives welcome remarks before the “Financial Stability: Policy Analysis and Data Needs” conference sponsored by the Federal Reserve Bank of Cleveland and the Treasury Department Office of Financial Research, in Washington DC.
At 10:00 am ET, Federal Reserve Chair Janet Yellen will testify about monetary policy before the Joint Economic Committee, in Washington DC.
At 1:10 pm ET, Federal Reserve Governor Stanley Fischer is expected to speak about financial stability at the Federal Reserve Bank of Cleveland’s conference, in Washington DC.
The material has been provided by InstaForex Company – www.instaforex.com
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