By Carla Mozee, MarketWatch , Anneken Tappe
The U.S. dollar extended a modest gain against its rivals on
Wednesday, and turned higher against the Canadian dollar after the
Bank of Canada left interest rates unchanged and sounded more
cautious than anticipated on future interest-rate raises.
What are currencies doing?
The ICE Dollar Index was up 0.2% to 93.557, after slipping into
negative territory immediately after economic data. The index was
up 0.6% at the halfway mark through the week. The broader WSJ U.S.
Dollar Index was up 0.2% at 86.95.
The buck rallied against the Canadian dollar , buying C$1.2766,
its highest level in three days, compared with C$1.2687 on Tuesday,
after the Bank of Canada's comments.
The British pound , which continues to be rattled by Brexit and
lack of progress in the negotiations between London and Brussels,
fell to $1.3383 from $1.3442 late Tuesday in New York. The euro was
also softer at $1.1792, down from $1.1826 in the previous
session.
Against the Japanese yen , the dollar fell to Yen112.26 from
Yen112.60 late Tuesday in New York.
The Australian dollar slipped to its lowest level since the
beginning of the month after the country's third-quarter GDP growth
reading failed to meet consensus expectations at 2.8% annual growth
versus 3% expected, according to FactSet. The Aussie last bought
$0.7564, down from $0.7606 late Tuesday.
What's driving the markets?
The dollar was helped by the sudden turn in the loonie, as the
Canadian dollar is also known. Traders had expected
hawkish-sounding comments
(http://www.marketwatch.com/story/canadian-dollar-bulls-hope-for-an-upbeat-boc-and-rate-hike-in-q1-2017-12-05),
supportive of an interest-rate increase in the first quarter of
2018 from the Bank of Canada on Wednesday, but instead heard words
of caution
(http://www.marketwatch.com/story/canadian-dollar-falls-after-dovish-bank-of-canada-comments-2017-12-06),
sending the Canadian currency lower. The BOC also left interest
rates unchanged, which was in line with expectations.
Back in the U.S., investors continued to focus on tax reform
negotiations after the Senate passed its version of the bill
(http://www.marketwatch.com/story/senate-passes-tax-bill-advancing-top-republican-priority-2017-12-02)
over the weekend. Traders are watching for lawmakers in the Senate
and the House to reconcile versions of their tax bills, which needs
to be done before a final bill is sent to President Donald Trump to
sign into law.
A sticking point has emerged over the corporate alternative
minimum tax, a provision that companies and top House Republicans
want to come to an end. The Senate's tax bill still has the
provision. The corporate AMT is meant to make corporations pay a
minimum tax of 20% if breaks make their tax bill too low.
Read:Here's why the corporate AMT is a hurdle to a final tax
bill
(http://www.marketwatch.com/story/heres-why-the-corporate-amt-is-a-hurdle-to-a-final-tax-bill-2017-12-05)
In other drivers, nonfarm payrolls, which will shed additional
light on the health of the U.S. economy are due on Friday,
following private labor market data on Wednesday, which showed
employment growth was solid in November.
In the U.K., the pound dropped after U.K. Brexit Secretary David
Davis reportedly said the government hadn't carried out any
economic assessment
(http://www.marketwatch.com/story/uk-hasnt-carried-out-assessment-of-brexits-economic-impact-davis-2017-12-06)
on how Britain's exit from the European Union will impact different
parts of the British economy as it's too early in the Brexit
process.
Britain's Prime Minister Theresa May was in the U.K. parliament
Wednesday fending off criticism over her government's handling of
Brexit talks. Sterling has struggled after what appeared to be an
agreement over some issues surrounding Brexit fell apart on Monday,
ahead of next week's summit of EU leaders. Arlene Foster, leader of
the right-wing Northern Irish Democratic Unionist Party, which is
May's coalition partner, reportedly turned down a proposal to
create a special arrangement for Northern Ireland's border with the
Republic of Ireland.
What are strategists saying?
Following Wednesday's ADP employment data, Capital Economics
chief U.S. economist Paul Ashworth wrote it was "consistent with
our estimate that the official nonfarm payroll employment will show
a 200,000 increase when the data are released this Friday."
"After the hurricane-related disruption that hit September's
payroll tally, prompting a bounceback in October, employment growth
should now revert to its previous trend of between 150,000 and
200,000 per month," Ashworth added.
"A group of German firms have signaled their unease and
intention to reconsider their trade links [with the U.K.] if
progress does not become clear. With the December EU summit
approaching next week, investors will be bracing themselves for
further movement and volatility," in the pound, said William
Anderson Jones, head of UK corporate dealing at RationalFX, in an
note.
What are the data?
ADP's November report on private-sector jobs
(http://www.marketwatch.com/story/private-sector-adds-healthy-190000-jobs-in-november-adp-says-2017-12-06)
showed 190,000 jobs added, down from 235,000 in October, but above
expectations for an increase of 180,000 private jobs.
Meanwhile, productivity rose 3% in the third quarter
(http://www.marketwatch.com/story/us-third-quarter-productivity-gain-left-at-3-2017-12-06),
just below the MarketWatch consensus estimate of 3.3%, and in line
with the previous quarter's report. Unit labor costs
(http://www.marketwatch.com/story/us-third-quarter-productivity-gain-left-at-3-2017-12-06)
for the same period slipped 0.2%, versus an expected increase of
the same amount.
(END) Dow Jones Newswires
December 06, 2017 11:10 ET (16:10 GMT)
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