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While you were sleeping: US dollar weakens

Friday 24th November 2017

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European stocks were mixed while oil rose and the US dollar continued its decline as investors reassessed their expectations for the pace of Federal Reserve interest rate increases next year. 

US financial markets are closed for the Thanksgiving holiday.

However, the US dollar slipped for a second day after Fed policy makers’ concern about the lack of inflation, as indicated in the minutes from their meeting ended on November 1 and released on Wednesday, signalled they might not raise interest rates as much as previously thought next year. 

“Many participants observed…that continued low readings on inflation, which had occurred even as the labour market tightened, might reflect not only transitory factors, but also the influence of developments that could prove more persistent,” according to the Fed the minutes.

“A number of these participants were worried that a decline in longer-term inflation expectations would make it more challenging for the committee to promote a return of inflation to 2 percent over the medium term,” the minutes showed.

Investors still expect the Fed to hike next month.

“The dollar has had a rough ride in the aftermath of the Fed minutes,” CIBC’s head of currency strategy Jeremy Stretch told Reuters. 

Europe's Stoxx 600 Index finished the session steady from the previous close. The latest data showed that the euro-zone economy grew more than expected in November, expanding at its fastest pace in 17 years. 

“There are no signs of stopping the euro-zone economy at the moment and 2018 is likely to start on a strong footing,” Bert Colijn, senior euro-area economist at ING Bank in Amsterdam, told Bloomberg. “With continued monetary support and some expected improvements in global growth in 2018, the euro-zone economy is set for another year of surprising growth.”

Also basking in optimism were oil prices as investors bet OPEC and its partners will extend limits on supply at a meeting next week. US crude climbed to US$58.44 a barrel, the highest level in two years.

The UK’s FTSE 100 Index inched 0.02 percent lower, and Germany’s DAX Index slipped 0.05 percent.

However, France’s CAC 40 Index rose 0.5 percent.

Bucking the trend in Paris, shares of Remy Cointreau fell from record highs after the company posted first-half profits that fell short of forecasts.

Thee company's investments in its recently acquired single malt brands Domaine des hautes Glaces and Westland had weighed on profits, as had the deconsolidation of its Passoa liqueur brand, Reuters reported, citing analysts.

Remy maintained its forecast for growth at constant exchange rates, said it was confident over second-half prospects for cognac demand and promised to press on with advertising and promotion.

The stock closed 1.7 percent lower in Paris. 

"The results were a bit below forecasts, but the stock has risen by more than 30 percent this year and so that's led to a bit of profit-taking," Keren Finance fund manager Gregory Moore, whose firm recently sold its Remy shares, told Reuters.


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