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U.S. shares were mixed after the close on Friday with the Dow Jones Industrial Average declining 0.04% but the S&P 500 index and the NASDAQ Composite index added gained 0.06% and 0.07 percent, respectively.
Meanwhile, the U.S. dollar remained roughly unchanged against a basket of major currencies as an uptick in safe-haven demand was offset by the weakness of sterling. The Japanese Yen and the Swiss Franc gained ground versus its American counterpart amidst escalating U.S.-North Korea tensions, sending the pair USD/JPY down 0.34% to 112.09 and the pair USD/CHF down 0.11% to 0.9697. The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was roughly flat at 91.98.
Global stock markets were under pressure amidst ongoing war of words between U.S. President Donald Trump and North Korean leader Kim Jong Un who on Friday said that Pyongyang will consider the “highest level of hard-line countermeasure in history” against the U.S. action to further isolate the nation.
Shortly before, North Korea’s Foreign Minister Ri Yong Ho reportedly said the North could consider a hydrogen bomb test on the Pacific Ocean of an unprecedented scale in respond to fresh sanctions from the U.S. and its allies.
The dollar jumped dramatically versus its major rivals on Thursday after the Fed decided to keep its interest rates unchanged in a range of 1 percent to 1.25 percent as widely expected. The central bank announced that it would start shrinking its $4.5 trillion balance sheet next month and trimming its massive holding of U.S. Treasury bonds and mortgage-backed securities that it acquired in the years after the 2008 financial crisis.
The Fed continued to reiterate that interest rates are likely to rise at a “gradual” pace given steady growth and low unemployment which is expected to boost inflation closer to their 2% goal. The central bank signaled that it expects one more interest rate hike by the end of the year with the consideration that hurricane damage are unlikely to affect the economy in the medium term. In its new set of projections, the Fed estimates that three quarter-point rate hikes would be appropriate next year.
Fed Chair Janet Yellen due to deliver a speech titled “Inflation, Uncertainty, and Monetary Policy” at the National Association for Business Economics’ Annual Meeting in Cleveland on Tuesday with her comments going to be monitored closely for any new insight on policy.
In the week ahead, the Conference Board is scheduled to publish data on U.S. consumer confidence on Tuesday that is expected to slide down to 119.6 points in September after a reading of 122.9 points in August. On Wednesday, the Census Bureau is due to release a report on Durable Goods Orders and Core Durable Goods Orders for August. While the former is forecast to reverse higher to advance by 1.1 percent last month after having plunged by 6.8 percent in the preceding month, the former is anticipated to rise for a fourth month in a row at the rate of 0.2 percent.
On Thursday, the Bureau of Economic Analysis will announce the final reading of U.S. Gross Domestic Product for the second quarter. The second read of Q2 GDP reached the number of 3% annualized growth, which was well above the reading of 2.6% initially released. The final read of Q2 GDP is expected to see a small upgrade to 3.1%.
Wrapping up an eventful week for the dollar, the Bureau of Economic Analysis is scheduled to report about the U.S. Personal Spending and Personal Income as well as the core PCE index for last month. Core PCE Price Index, which is the Fed’s favorite inflation measure, stood at 1.4% year-on-year in July. A monthly rise of 0.2% is expected.
Turning to the British Pound, the currency slid against major rivals after Moody downgraded the UK’s credit rating to Aa2.
In the week ahead, Governor Mark Carney is due to deliver opening remarks at the Bank of England’s conference celebrating 20 years of independence in London on Thursday and then is scheduled to make closing statements on Friday. Besides the BOE, market participants will focus on a final reading of second-quarter economic growth which is due on Friday.
The Bank of Japan kept its monetary stimulus unchanged on Thursday as expected by economists, the Yen lost ground after a dovish new board member said the effects of the current yield curve program of the Japanese central bank weren’t strong enough which would not be able to bolster inflation higher towards BOJ’s target by the projected time frame of around fiscal 2019.
BoJ Governor Haruhiko Kuroda is due to speak at a meeting with business leaders in Osaka at on Monday and is scheduled to speak again on Thursday.
The Canadian dollar declined versus its American counterpart after data on core retail sales and inflation rose less than forecast in August. A report published by the Statistics Canada showed retail sales increased by 0.4% in August after a 0.1% advance in the prior month. The reading beat analysts’ expectations calling for a 0.1% gain.
However, the core reading was weaker than forecast. Indeed, core retail sales advanced only 2 percent in August. July’s figure was also revised downward to 0.4 percent from an initial 0.7% increase. Canadian inflation also rose less than forecast in August, increasing only 0.1% from the previous month. The CPI index failed to reach forecasts for a 0.2% gain after a flat reading in July. On a yearly basis, CPI jumped 1.4% last month, lower than expectations for a 1.5% rise.
Next week, the Statistics Canada is about to report on domestic Gross Domestic Product for July. Canada’s economy grew at a robust rate of 4.5% annualized in Q2 and 0.3% on a monthly basis in June.