The US dollar maintained its strength against its major counterparts as demand for the currency remained intact despite disappointing data, the weekly report of National Bank of Kuwait (NBK) said on Sunday.
The demand for the greenback remained supported after the Federal Reserve statement reiterated that it expects rates to remain on hold for "a considerable time," after its bond purchasing program ends. The Federal Reserve stuck to its pledge to keep interest rates near zero for a "considerable time" after it stops buying assets, even as it outlined a strategy to exit from six years of unprecedented easing, the report noted. "Moreover, Fed policy makers increased their median estimate for the key rate to 1.375 percent at the end of 2015 against June's forecast for 1.125 percent," report pointed out.
Fed Chair Janet Yellen said at a press conference after a meeting of the Federal Open Market Committee in Washington: "There are still too many people who want jobs but can't find them." Yellen stated that the Fed funds rate is expected to move close to normal levels by 2017. However, rates could rise sooner and more rapidly as the Fed's decisions are mainly data dependent, the report added. According to the report, the cost of living in the US unexpectedly dropped last August for the first time in more than a year, showing inflation still is falling short of the Federal Reserve's goal as policy makers meet. The consumer-price index declined 0.2 percent, the first decrease since April 2013. Economists expected that price will be unchanged, the report added.
Excluding volatile food and fuel, the so-called core measure was unchanged, the first time it failed to increase in almost four years. A drop in energy costs and muted global growth are helping contain inflation, it stated.
Housing starts slumped in August after reaching the highest level in almost seven years, pointing to an uneven pickup in the US residential real-estate market that will limit its contribution to economic growth, the report said.
Beginning home construction fell 14.4 percent, the most since April 2013, to a 956,000 annualized rate following July's revised 1.12 million pace that was the strongest since November 2007, it confirmed. "The number of Americans filing applications for unemployment benefits plunged last week to a two-month low, a sign the labor market continues to strengthen." "Jobless claims decreased by 36,000 to 280,000 in the period ended September 13, the Labor Department stated last week. Economists called for a decrease to 305, 000," it added.
Meanwhile, the report said that German investor confidence dropped for a ninth month amid increasing political tension in Europe, even as the European Central Bank steps up its stimulus. "The Frankfurt-based ECB lent 82.6 billion euros ($106.5 billion) to euro-area banks at a fixed interest rate of 0.15 percent in its targeted longer-term refinancing operations." As for UK, the report said Bank of England Minutes from the MPC monetary policy meeting held on 3 and 4 September and released yesterday reveal that the Committee voted 2-7 in favor of holding the interest rate at the record low of 0.5 percent and unanimously decided for keeping the program of asset purchases steady at Sterling 375 billion.
The report noted the UK unemployment has fallen to the lowest in the last six years, indicating continued strength in the labor market.
"The jobless rate fell to 6.2 percent in the three months through July from 6.4 percent, a bigger decline than economists had forecast." The report noted that Scotland voted to stay in the UK in a referendum on independence, stepping back from a breakup of the 307-year-old union while wringing promises of more financial power from Prime Minister David Cameron.