Fed rate worries lift dollar, weigh on gold

June 26: The dollar rose, gold prices fell and stock markets steadied on Wednesday after top Federal Reserve officials dented hopes for a big cut in US interest rates.

Oil prices jumped and bitcoin reached an 18-month high close to $13,000.

“The dollar is a touch stronger as the currency market tries to guess and second-guess the Fed's next move,” said Fiona Cincotta, a senior market analyst at City Index trading group.

The Federal Reserve last week raised expectations that it would soon announce its first rate reduction in more than a decade following downbeat US economic data.

However, optimism took a hit after Fed boss Jerome Powell on Tuesday said policymakers would not “overreact” to recent data.

Also Tuesday, voting member James Bullard, considered a key dove on the Fed board, told Bloomberg that a cut of 50 basis points — which many investors had been hoping for — would be excessive.

While the dollar largely rose against main rivals Wednesday, it dipped versus the British pound.

Bank of England governor Mark Carney, in testimony to UK MPs on Wednesday, hinted at fresh BoE stimulus measures should the country crash out of the European Union without a deal.

But the markets' main focus was on the Federal Reserve.

– Stock markets flat –

“Equity markets are looking a little flat on Wednesday after the Fed… massaged expectations”, ahead of a July rate-setting meeting, said Oanda analyst Craig Erlam.

Gains for the dollar capped gold's rally, which is priced in the US unit and becomes more expensive when the greenback rises.

The precious metal has hit near six-year highs in recent days, with its haven status benefitting from an escalation in US-Iran tensions, which along with a drop in US crude stockpiles have provided support to oil prices.

Markets were also looking ahead to key trade war talks between US President Donald Trump and Chinese counterpart Xi Jinping on the sidelines of the G20 summit in Japan later this week.

The US has dampened expectations for a deal between the two, saying the talks would set out a path for an agreement.

Officials did however say they were willing to hold off hiking tariffs on more Chinese goods, Bloomberg News reported.

Elsewhere on Wednesday, bitcoin surged to almost $13,000 on continued demand after Facebook recently unveiled plans for its own crypto currency.

– Key figures around 1045 GMT –

Euro/dollar: DOWN at $1.1364 from $1.1370 at 2050 GMT

Pound/dollar: UP at $1.2696 from $1.2692

Dollar/yen: UP at 107.67 yen from 107.18

London – FTSE 100: FLAT at 7,424.41 points

Frankfurt – DAX 30: UP 0.5 percent at 12,284.24

Paris – CAC 40: UP 0.1 percent at 5,521.95

EURO STOXX 50: UP 0.2 percent at 3,452.34

Tokyo – Nikkei 225: DOWN 0.5 percent at 21,086.59 (close)

Hong Kong – Hang Seng: UP 0.1 percent at 28,221.98 (close)

Shanghai – Composite: DOWN 0.2 percent at 2,976.28 (close)

New York – Dow: DOWN 0.7 percent at 26,548.22 (close)

Brent North Sea crude: UP 65 cents at $65.70 per barrel

West Texas Intermediate: UP 96 cents at $58.79 per barrel

Gold: DOWN at $1,407.56 per ounce from $1,414.24

Bitcoin – UP at $12,561 from $11,402


Posted on: 2019-06-26T16:50:00+05:00