U.S. Dollar Near 9 Month High; Euro Area Markit PMI At 10 Month High

The U.S. dollar remains near a 9 month high against the euro following last Thursday’s European Central Bank meeting that raised hopes the ECB would continue their stimulus program beyond March 2017 and alongside rising expectations that a rate hike is around the corner in the U.S. with the Federal Reserve.

The CME’s Fed Watcher tool shows a 63.6 percent probability that committee members at the Fed will raise the federal funds by 0.25 percent basis points to a target rate of 0.50-0.75 percent during their 2 day policy meeting in December.

Today New York Fed Reserve President William Dudley is expected to speak at a conference in New York.

St. Louis Fed President James Bullard and Chicago Fed President Charles Evans will also be giving talks today.

This morning, IHS Markit reported that flash euro area (Composite Output Index) PMI reached a 10 month high in October and raised to 53.7, up from 52.6 in September, the fastest monthly increase in business activity since December, led by strong growth in Germany.

“The eurozone economy showed renewed signs of life at the start of the fourth quarter, enjoying its strongest expansion so far this year with the promise of more to come. With backlogs of work accumulating at the fastest rate for over five years, business activity growth and hiring look set to accelerate further as we head towards the end of the year” said Chris Williamson, chief economist at IHS Markit in a released statement.

“October’s PMI is consistent with a quarterly GDP growth rate of 0.4%, led by a 0.5% pace of expansion in Germany. Modest growth of 0.2-0.3% is being signaled for France, but there are various indicators which suggest that France will enjoy stronger growth in coming months, including a marked build-up of uncompleted work” Williamson said.

“Policymakers will be encouraged by signs of both stronger economic growth and rising price pressures, and the prospect of a robust fourth quarter will fuel further speculation of a possible tapering of QE purchases by the ECB. Not only are average charges increasing at the steepest rate for just over five years, but October also saw the extent of manufacturing supply chain delays hit one of the highest in five years. Increasingly widespread delays suggest demand is outstripping supply for many goods, something which is usually soon followed by rising prices and investment in additional capacity”  Williamson added.

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Johnathan Schweitzer



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