Second Time in the Year Federal Reserve Increases Rates


The Pound to Dollar Pair has Been Selling off Quite Heavily After the UK Elections

The Federal Reserve announced to increase US interest rate for the second time in 2017 and provided details for shrinking the balance sheet.

The rate setting committee of U.S central bank said that the economy had continued to strengthen and job gains have remained solid, which has indicated its views on recent consistency in inflation as largely transitory.

The plan the Fed outlined is very gradual, but will still result in a meaningful increase in the amount of Treasuries and mortgage-backed securities on the market - especially in the intermediate portion of the yield curve.

Picture it as a double thumbs up from Fed chairwoman Janet Yellen. The Swissy has reclaimed its broken bullish trend line, so it will be interesting to see if it will be able to climb back towards the top of its range again given the renewed hawkishness from the Fed. In a separate report from the Labor Department's, Consumer Price Index declined 0.1 percent in May.

Just watch, she said: in a few years, the Fed will have achieved its twin goals of maximum employment and stable prices.

MSCI's broadest index of Asia-Pacific shares outside Japan dropped 0.7 percent, led by resource shares.

Worry that policy tightening measures will weigh on China's growth, kept Chinese stocks in check. Japan's Nikkei fell 0.3%.

Going into 2017, the Fed was expected to raise rates three times during the year, which would help bolster these bank's coffers, as higher rates translate into higher loan yields.

ANALYST VIEWPOINT: "Asian markets were seen broadly lower this morning, taking little cues from overnight markets".

After a rally to the $1,265 area, gold came under renewed selling pressure in Europe on Thursday as the dollar gained fresh support against major currencies with EUR/USD sliding to the 1.1150 area. The FTSE 100 of Britain dropped 0.4 percent to 7,474.40.

Euro zone government bond yields edged up in early trade.

USA jobless claims were slightly lower than expected at 237,000 in the latest week from 245,000 previously while there was a sharp increase in the New York Empire index to 19.8 for June from -1.0 in May.

GBP/USD was up 0.18% at 1.2769 after the Bank of England left its monetary policy unchanged, in line with expectations, but members of the Monetary Policy Committee surprised markets with three dissents.

Oil prices, which are having a negative effect on inflation worldwide, held steady with global inventories high and doubts over whether the Opec producers group would be able to implement agreed output cuts. Brent crude, used to price worldwide oils, rebounded, gaining 6 cents higher to $47.06 a barrel. It even rose by $15 to touch $1,288 per ounce but decreased after that to close at $1,260.

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