Dollar Lifted by Upbeat Fed

Stocks march on as Fed rate hike looms, dollar steady

The Bloomberg Dollar Spot Index rose for the first time this week as euro-longs kept bailing out and the pound came under pressure before the Bank of England's policy decision.

At the time of writing this article, the Euro Australian Dollar exchange rate trended in the region of 1.4710.

The MSCI All-Country World index .MIWD00000PUS was up 0.1 percent and has remained stuck in a tight range this month.

After being sold from its highs in profit taking and due to underwhelming domestic data for most of the week, the Euro edged up from its lows on Friday as investors reacted to the latest news from Greece.

The year-on-year gain in the CPI in May was still larger than the 1.6 percent average annual increase over the past 10 years.

Money market instruments such as Fed fund futures show market players see the likelihood of one more rate hike this year as less than 50 per cent.

"With financial conditions remaining supportive. and USA financials breaking higher, the Fed may see little reason to moderate its rate hike projections when meeting today", strategists at Morgan Stanley said in a note to clients.

"With many market participants anxious about a dovish outlook, a surprisingly hawkish one could catch some investors off guard", she said.

The trade-weighted index rose to 77.58 from 77.48 yesterday. Chairwoman Janet Yellen said. on Wednesday during an afternoon news conference, after the Fed raised rates for the fourth time since the end of 2015, that the Fed is "monitoring" stubbornly low inflation but isn't ready to veer from its tightening schedule, deeming recent week data as "one-off". Thomson Reuters CRB index tumbled to 14-month lows, having fallen nearly 12 per cent from this year's high hit in January.

The U.S. central bank lifted the benchmark lending rate by a quarter percentage point, its second quarter-point hike this year, and said it would begin cutting its huge holdings of bonds and securities this year. "But that view will be tested in coming months", he added.

Optimism about the global economy also underpinned European equities where the pan-European STOXX 600 (.STOXX) was up 0.6 percent, led by industrials and financials. Data earlier Wednesday showed US consumer prices unexpectedly fell in May, suggesting a softening in domestic demand.

Excluding automobiles, gasoline, building materials and food services, retail sales were unchanged last month after an upwardly revised 0.6 percent rise in April. Manufacturing production slipped from 1.1% to 0.4%. Despite last month's weak core retail sales reading, low inflation could translate into higher consumer spending in the calculation of GDP.

According to the CME FedWatch tool, bets that the Fed will hike rates this week are over 95%.

Output increased at a 2.1 percent pace in the October-December period.

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