The dollar is little changed in comparison to its major competitors Wednesday. The Federal Reserve concluded its 2-day meeting on Wednesday and, as expected, made no change to its highly accommodative monetary policy. New home sales in the U.S. increased more than expected in September, providing further evidence of the improvement in housing.
The Federal Reserve will continue to purchase $40 billion of mortgage-backed securities per month, and gave no indication they will expand their quantitative easing program before year’s end.
Some economists thought the Fed would adopt a numerical GDP or unemployment target for raising rates. Instead, policy makers kept a calendar-linked approach, projecting interest rates are likely to remain exceptionally low through mid-2015, or until the labor market improves “substantially.”
“Unemployment rate remains elevated,” the Fed said in a statement accompanying its decision. More encouraging, “Household spending has advanced a bit more quickly,” and housing has “improved from a depressed level.” European Central Bank President Mario Draghi has defended a plan to buy government bonds that has drawn strong opposition from Germany.
Making a rare appearance in a national parliament, the ECB Chief told German lawmakers at the Bundestag on Wednesday that the bond purchases known as the Outright Monetary Transactions (OMTs) will not lead to inflation.
“We have designed our operations so that their effect on monetary conditions will be neutral. For every euro we inject, we will withdraw a euro,” Draghi said.
Italy requires two or three years to see an improvement in productivity as a result of structural reforms introduced by the government, Klaus Regling, head of European Stability Mechanism told daily Il Sole 24 Ore on Wednesday. He said Italy is on the right track.
The dollar rose to a week and a half high of $1.2919 versus the Euro in early trade Wednesday, but has since pulled back to around $1.2965.
Confidence among Eurozone consumers improved slightly in October, a survey published by European Commission showed Tuesday. The flash consumer confidence indicator rose to -25.6 in October from -25.9 in September.
Economists expected the reading to remain unchanged from the September level. Eurozone private sector output in October dropped at the sharpest rate since June 2009, in a worrying sign that the downturn in the single-currency bloc will likely deepen in the final quarter of the year.
The composite output index, which measures the combined output of the manufacturing and service sectors, fell to 45.8 in October from 46.1 in September, survey data from Markit Economics revealed Wednesday. Economists had expected a higher score of 46.5.
The unexpected sixth consecutive monthly decline took German business morale to a two-and-a half year low in October as companies assessed their business situation as worsening.
Confounding expectations for an improvement, the business climate index dropped to 100 from 101.4 September, results of the Ifo Institute survey that is based on 7,000 executives showed Wednesday. Economists had expected a reading of 101.6.
Business conditions across German manufacturing sector deteriorated further in October due to “sharp and accelerated” decrease in new orders, preliminary results of a survey by Markit Economics revealed Wednesday.
The purchasing managers’ index for the manufacturing sector fell to 45.7 in October from 47.4 in September. Economists expected the PMI to rise to 48.
French manufacturing sector contracted at slower pace in October, the flash survey results from Markit Economics revealed Wednesday. The purchasing managers’ index rose to 43.5 in October from 42.7 in September. Economists expected a higher reading of 44.
Bank of England Governor Mervyn King said the central bank is ready to add more stimulus if the recent positive signs in the economy fade.
The recovery and rebalancing of the UK economy are proceeding at a slow and uncertain pace and at this stage, it is difficult to know whether the recent positive signs would persist, King said in a speech to the South Wales Chamber of Commerce on Tuesday.
The greenback has pulled back from an early high of $1.5935 versus the pound sterling, to a 2-day low of $1.6047.
The Industrial Trends survey conducted by the Confederation of British Industry showed Wednesday that U.K. factory orders dropped unexpectedly in October. The order book balance fell sharply to -23 in October from -8 in September. The balance was forecast to improve to -6.
The buck has continued to hover around the Y79.770 level against the Japanese Yen, which is at the lower end of nearly a 3-day trading range.
New home sales in the U.S. rose by more than expected in the month of September, according to a report released by the Commerce Department on Wednesday, with sales reaching a two-year high. The report showed that new home sales rose 5.7 percent to an annual rate of 389,000 in September from the revised August rate of 368,000.
Economists had expected new home sales to increase by about 3.2 percent to an annual rate of 385,000 from the 373,000 originally reported for the previous month.