On Wednesday, the US Dollar rallied against its major peers and erased its earlier losses after the US Central Bank lifted the benchmark lending rate by 25bp and said that it would begin cutting its $4.2 trillion holdings of Bonds and securities this year. Federal Reserve chair Janet Yellen said that softness in inflation won’t last, suggesting that policymakers will press ahead and raise interest rates one more time before the year ends and then three times in 2018.
The Dollar and Treasury Yields, dropped sharply earlier yesterday after the core inflation increased to 1.7%, the fourth straight monthly deceleration and the slowest overall pace in two years. But Ms. Yellen’s comments on the strengthening labor market and how it is “important not to overreact” to individual data points underscore the Fed’s intent to continue its tightening cycle.
Meanwhile, early on Thursday, the Aussie jumped to a near two-and-half month high against the US Dollar after the release of upbeat jobs data, reinforced the case for a stable interest rate outlook domestically. Australia’s unemployment rate dropped sharply to a four-year low of 5.5% in May allaying concerns about an economic downturn, while the number of people employed rose by 42,000, compared with an expected 10,000 rise.
Crude Oil prices slumped nearly 4% to their lowest close in seven months, hit by an unexpected large build of 2.1 million in Gasoline inventories and an international outlook that suggests a big increase in supply in the coming year. The news underscored the market’s ongoing struggles with weak gasoline demand in the US, the world’s top consumer of the motor fuel, and rising production, especially from US Shale drillers.