Thursday, 19 July, 2018

Tight US labor market should push inflation higher -Fed's Dudley

Nellie Chapman | 20 June, 2017, 02:37

Gold hit four-week lows on Monday as the dollar held firm and the market waited for comments from a top Federal Reserve official on U.S. monetary policy, but prices were supported by the start of talks on the terms of Britain's departure from the EU.

Lingering questions about sluggish inflation, which can erode a bond's fixed payments, has helped to mostly put some downward pressure on yields, which move inversely to prices lower, despite the hawkish monetary-policy stance maintained by the Federal Open Market Committee and Fed Chairwoman Janet Yellen, who described signs of weak inflation and economic growth as "one-off". "Inflation is a little lower than what we would like, but we think that if the labor market continues to tighten, wages will gradually pick up, and with that inflation will gradually get back to 2 percent", Dudley told a local business group in Plattsburg, New York. The euro was up 0.1 percent against the yen, at 124.25 yen.

Silver lost 0.1 percent to $16.56 an ounce and platinum slid 0.5 percent to $919.5 an ounce.

The dollar index, which measures the greenback against six major peers, rose 0.38 percent at 97.532 in late trading.

The British pound fell nearly 0.1 percent to $1.2769 from late Friday levels in NY after a van rammed into worshippers as they were leaving Finsbury Park mosque in North London early on Monday.

Brexit Secretary David Davis starts negotiations in Brussels on Monday that will set the terms on which Britain leaves the European Union and determine its relationship with the continent for generations to come.

"My view is that Dudley won't sound too dovish, and thus allow the dollar's gradual rise to resume".

The Dow Jones Industrial Average rose 144.71 points, or 0.68 percent, to end at 21,528.99, the S&P 500 gained 20.31 points, or 0.83 percent, to 2,453.46 and the Nasdaq Composite added 87.26 points, or 1.42 percent, to 6,239.01.

The common currency showed little reaction to French President Emmanuel Macron winning a commanding majority in his country's parliamentary election on Sunday, according to official figures and pollster projections. Traders raised their outlook on a rate hike by the Fed's December 12-13 policy meeting to 47 percent from 41 percent late on Friday, CME Group's FedWatch tool showed.

The dollar added 0.1 percent to 111.01 yen, after touching a two-week high on Friday. United States gold futures for August delivery fell 0.2 per cent to $1,254 per ounce. It hit a fresh low of $1,250.80 during the session, its lowest since May 24.

USA crude fell 1.41 percent to $44.11 per barrel and Brent was last at $46.81, down 1.18 percent on the day.