Federal Reserve Leaves Interest Rates Unchanged

And the Institute for Supply Management reported a drop in factory activity.

South Africa’s rand weakened against the dollar in early trade on Thursday as the greenback rallied on the back of the hawkish U.S. Federal Reserve statement, pushing emerging market currencies lower.

The euro is closing in on a five-month high of $1.0951 after receiving support on Emmanuel Macron winning the first round of France’s presidential election. Wednesday’s statement offered no new details.

“The sugar high is wearing off”, said Tim Quinlan, a senior economist at Wells Fargo Economics in Charlotte, North Carolina.

U.S. stocks were little changed as gains in technology stocks, led by Apple, countered the weak reports. He also cited USA first-quarter gross domestic product growth data last week that showed the US economy grew at its weakest pace in three years.

The price index in question is the Personal Consumption Expenditure, which directly reflects purchasing power. The drop reflected declines in the prices of automobiles and mobile phone services.

Just 98,000 jobs were added in March while job gains have averaged 178,000 per month in the past three months.

The report showed that the Fed’s preferred measure of inflation weakened after briefly hitting the central bank’s annual 2% target in February.

“Last night the Fed rate decision was nearly exactly as expected with a slight hint towards hawkishness”, Standard Bank trader Warrick Butler said.

“The June hike looks pretty much alive”, said Win Thin, global head of emerging markets currency strategy at Brown Brothers Harriman in NY.

“The USD and US rates were slightly higher after the statement, with nothing to change the consensus view that the Fed is likely to hike again next month, subject to the data flow over the next six weeks”. That trade has stalled since the start of the year, with the dollar falling 3%, as investors doubted the administration will be able to deliver on those proposals.

According to Robert Denk, Assistant Vice President for Forecasting and Analysis at the National Association of Home Builders, March was a “bad month”, economically speaking, but April could be promising-and the FOMC was right to bank on that.

Payroll processing firm ADP also stated that nonfarm private employment rose by 177,000 last April beating forecasts of an increase by 175,000.

Sterling remained above $1.2900 but dipped sharply in Asia from an early session high of $1.2947 in reaction to a Financial Times headline that the European Union has revised the UK’s Brexit bill higher to 100,000 billion euros, which is double the initial estimate.