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Forex News: Dollar Little Changed After Fed Maintains Rates

Dollar Little Changed After Fed Maintains Rates

02/01/2017 - 14:20:00 (RTTNews)

(RTTNews) - The dollar is turning in a mixed performance against its major rivals Wednesday afternoon, but it little changed overall. The U.S. currency is modestly higher against the Euro and the Japanese Yen, but down against the British pound.

The Federal Reserve kept interest rates on hold Wednesday, taking a wait-and-see approach as President Donald Trump and Congress negotiate on fiscal stimulus plans.

The decision to keep rates on hold was unanimous, and came as no surprise to experts.

Markets were hoping the Fed would offer clues about when the next interest rate would come, but policy makers gave no indication as to whether further tightening imminent.

The central bank said the economy "continued to expand at a moderate pace" and that job gains "remained solid." However, core inflation remains below the Fed's 2 percent target.

Suggesting that the job market got off to a strong start in 2017, payroll processor ADP released a report on Wednesday showing stronger than expected private sector job growth in the month of January. The report said private sector employment jumped by 246,000 jobs in January after climbing by a revised 151,000 jobs in December.

Economists had expected an increase of about 168,000 jobs compared to the addition of 153,000 jobs originally reported for the previous month.

A report released by the Institute for Supply Management on Wednesday showed growth in the U.S. manufacturing sector accelerated to the fastest rate in over two years in the month of January. The ISM said its purchase managers index rose to 56.0 in January from a revised 54.5 in December, with a reading above 50 indicating growth in the manufacturing sector.

Economists had been expecting the index to inch up to 55.0 from the 54.7 originally reported for the previous month.

Reflecting a steep drop in spending on public construction, the Commerce Department released a report on Wednesday showing an unexpected pullback in U.S. construction spending in the month of December.

The report said construction spending dipped by 0.2 percent to an annual rate of $1.182 trillion in December from a revised $1.184 trillion in November. Economists had expected spending to rise by 0.2 percent.

The dollar climbed to a high of $1.0720 against the Euro Wednesday, but has eased back to around $1.0750 following the Fed announcement.

Eurozone manufacturing sector expanded more than initially estimated in January to the strongest level in sixty-nine months, final data from IHS Markit showed Wednesday. The Purchasing Managers' Index, or PMI, climbed to 55.2 in January from 54.9 in December. That was just above the preliminary reading of 55.1.

Germany's manufacturing sector expanded less than initially estimated in January to its strongest level in three years, final data from IHS Markit showed Wednesday. The Markit/BME manufacturing Purchasing Managers' Index rose to 56.4 in January from 55.6 in December. The flash PMI reading was 56.5.

The French manufacturing sector logged further solid expansion in January to its highest level in sixty-eight months, final data published by IHS Markit showed Wednesday. The manufacturing Purchasing Managers' Index, or PMI, climbed to 53.6 in January from 53.5 in December. The flash score was 53.4.

The buck has fallen to nearly a 1-week low of $1.2645 against the pound sterling Wednesday afternoon, from an early high of $1.2540.

British manufacturing growth remained strong at the start of the year despite record input cost inflation, survey results from IHS Markit and the Chartered Institute of Procure showed Wednesday. The Markit/CIPS purchasing managers' index for the manufacturing sector eased to 55.9 in January from December's two-and-a-half year high of 56.1. The score was in line with economists' expectations.

U.K. house prices rose at a slower pace in January, figures from the Nationwide Building Society showed Wednesday. The house price index increased 4.3 percent year-on-year following 4.5 percent rise in December. The climb was in line with economists' expectations.

Shop prices in the United Kingdom were down 1.7 percent on year in January, the British Retail Consortium said on Wednesday. That missed expectations for a decline of 1.0 percent on year following the 1.4 percent decline in December.

The greenback rose to an early high of Y113.950 against the Japanese Yen Wednesday, but has since pulled back to around Y113.335.

The manufacturing sector in Japan picked up steam in January, the latest survey from Nikkei showed on Wednesday with a manufacturing PMI score of 52.7. That's up from 52.4 in December, and it moves further above the boom-or-bust line of 50 that separates expansion from contraction.

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