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    MORNING BELL: December Fed rate hike in view

    Fed Chair Yellen pointed out on Wednesday the economic growth, low unemployment levels and the promising inflation direction, all of which signal that the US is ready for a rate increase, possibly in December. She stressed that any rate hikes would be at a slow, gradual pace in order to ensure economic recovery and avoid disturbance of the housing sector. The Dollar Index hit a three-month high on Wednesday after the positive Services PMI data, while gold dropped to a one month low due to a stronger dollar. In earnings news, Facebook revenue beat expectations pushing its share up to an all-time high of $109.34 in extended trading.

    The euro hit a 3.5 month low against the US dollar on Fed Chair Yellen’s comments. ECB President Draghi called earlier for a uniform protection of savers in the euro zone, otherwise the currency union is threatened by vulnerability.  He stated that, "when push comes to shove, depositors must be afforded similar protection wherever they are located." On the other hand, the British pound climbed to an eleven week high against the euro following its strong services sector growth data. The BOE monetary policy decision is expected at 12:00 GMT on Thursday, followed by Governor Carney’s speech at 12:45 GMT. 

    Reserve Bank of Australia Governor Stevens stated in an optimistic speech late on Wednesday that Australia’s economy is progressing and is becoming more independent from mining-led growth. Both the Australian and New Zealand dollars suffered some losses as expectations were renewed for a Fed December rate hike. The kiwi is faced with its biggest weekly loss since September if it continues to weaken further.

     

     


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