Forex – Dollar Extends Gains as Fed Firms up December Rate Hike Expectations

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Forex - Dollar Extends Gains as Fed Firms up December Rate Hike Expectations

News – The dollar extended gains against its rivals Thursday after the Federal Reserve gave an upbeat assessment of the economy and signalled a December rate hike remained on track.

The U.S. dollar index, which measures the greenback against a trade-weighted basket of six major currencies, rose by 0.64% to 96.45.

The Federal Reserve left interest rates on hold Thursday, but delivered an upbeat assessment of the economy and labor market, reaffirming expectations for a December rate hike.

Following the release of the statement, the odds of a December rate hike inched higher from a day earlier. Nearly 80% of traders expect the Federal Reserve to hike rates in December, according to News’s Fed rate monitor tool.

The Fed’s unchanged decision on rates arrived just hours after economic data underlined ongoing tightness in the U.S. labor market.

The U.S. Department of Labor reported Thursday that initial jobless claims dropped by 12,000 to a seasonally adjusted 215,000 for the week ended Nov. 3, in line with economists’ estimates.

A turn lower in sterling, meanwhile, also supported the dollar as market participants grew anxious about the prospect of a Brexit deal after a UK government official reportedly downplayed reports that an agreement was imminent.

Media reports suggesting that Britain could seal a divorce deal with the European Union in the next few days should be taken “with a very large pinch of salt,” a senior UK government source told the Press Association on Thursday.

GBP/USD fell 0.56% to $1.3053, while EUR/USD dropped 0.58% to $1.1361.

USD/CAD rose 0.53% to C$1.3183 as stronger Canada housing starts did little to support the loonie, which continues to be weighed down by falling oil prices.

USD/JPY rose 0.39% to Y113.26.

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