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Forex News: Dollar Paring Gains After Fed Leaves Rates Unchanged

Dollar Paring Gains After Fed Leaves Rates Unchanged

05/02/2018 - 14:12:00 (RTTNews)

(RTTNews) - The dollar has begun to pare its early gains against its major rivals Wednesday afternoon, following the conclusion of the Federal Reserve's policy meeting. As expected, the Fed kept monetary policy unchanged but signaled its intention to raise rates later this year thanks to underlying strength in the U.S. economy.

"In view of realized and expected labor market conditions and inflation, the (Federal Open Market) Committee decided to maintain the target range for the federal funds rate to 1-1/2 to 1-3/4 percent," the Fed's statement read.

A June rate hike remains on the table, as the Fed has projected at least two more rate hikes in 2018 following the most recent tightening in March. Also in March, the Fed raised its growth forecasts for 2018 and 2019 and projections pointed to an extra rate increase in 2019.

A report released by payroll processor ADP on Wednesday showed private sector employment in the U.S. increased by slightly more than anticipated in the month of April. ADP said private sector employment surged up by 204,000 jobs in April after spiking by a revised 228,000 jobs in March.

Economists had expected private sector employment to shoot up by about 200,000 jobs compared to the jump of 241,000 jobs originally reported for the previous month.

The dollar rose to over a 3 1/2 month high of $1.1952 against the Euro Wednesday, but has since retreated to around $1.1985.

The euro area economy expanded at a slower pace in the first quarter, preliminary flash estimate from Eurostat showed Wednesday. Gross domestic product grew 0.4 percent sequentially in the first quarter, slower than the 0.7 percent expansion seen in the fourth quarter. The rate came in line with expectations.

Eurozone manufacturing activity grew at a slower pace at the start of the second quarter but slightly better than the initially estimated rate, final data from IHS Markit showed Wednesday. The final Purchasing Managers' Index fell to a 13-month low of 56.2 in April from 56.6 in March. The flash reading was 56.0.

The euro area unemployment rate remained unchanged in March, data published by Eurostat showed Wednesday. The jobless rate held steady at 8.5 percent in March, the lowest since December 2008. The rate stood at 9.4 percent in March 2017.

The buck rose to a high of $1.3575 against the pound sterling Wednesday, but has since eased back to around $1.3615.

UK construction sector rebounded in April from the weather-related disruptions seen in March, survey data from IHS Markit showed Wednesday.

The Markit/Chartered Institute of Procurement & Supply construction Purchasing Managers' Index rose to 52.5 in April from a 20-month low of 47.0 in March. The latest reading was the highest since November 2017 and well above the forecast of 50.5.

The greenback broke out to nearly a 3-month high of Y110.034 against the Japanese Yen Wednesday, but has since pulled back to around Y109.690.

The monetary base in Japan was up 7.8 percent on year in April, the Bank of Japan said on Wednesday - coming in at 492.020 trillion yen. That follows the 9.1 percent spike in March.

The services sector in Japan continued to expand in April, and at a faster rate, the latest survey from Nikkei revealed on Wednesday with a services PMI score of 52.5. That's up from 50.9 in March, and it moves further above the boom-or-bust line of 50 that separates expansion from contraction.

Japan's consumer confidence weakened unexpectedly in April after remaining stable in the previous month, data from Cabinet Office showed Wednesday. The seasonally adjusted consumer confidence index dropped to an eight-month low of 43.6 in April from 44.3 in March. Economists had expected the index to rise to 44.5.

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