Stock Market Watch

Forex Market Update: Dollar Index Gains After GDP, and Job Data

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The U.S. dollar index gained sharply on Wednesday following the release of stronger-than-expected job and GDP data releases, fanning speculation that the Federal Reserve could soon start tapering its bond purchase program.

The dollar index, a measure on dollar’s performance against a basket of six major traded currencies, was last up 0.34% to 82.12.

The Commerce Department said that the U.S. economy expanded at an annualized rate of 1.7% in the second quarter, easily beating economists’ consensus forecast for 1% growth, according to a poll conducted by Reuters.

The Automatic Data Processing Inc’s (ADP) private sector job report showed that 200,000 jobs were added in July compared to economists’ forecast of 180,000 new job additions.

Market participants will now keep an eye on the Fed’s policy rate statement later today. The Fed’s two-day open market committee meeting will end at 2:00 p.m. EST. Although the Fed’s chairman Ben Bernanke earlier offered a very dovish looking forward guidance (low interest rates for an extended period of time), investors are anxious to know when the bank intends to start the scaling down of economic stimulating measures.

If Bernanke hints at the winding down of asset purchases from September then the dollar is likely to gain more against rival currencies.

Tighter monetary policy (end of quantitative easing) will increase interest rates on U.S. bonds which in turn boost the demand for dollar due to favorable interest rate differentials.

 








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edliston
Post Written By: Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.

Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing.

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