Dollar boosted on Fed-ECB policy divergence

The US dollar rose on Friday (November 20th) as investors increased bets the Federal Reserve would raise rates in December, while the European Central Bank appeared on course to extend stimulus within weeks.

EUR/USD slid 0.3 per cent to hold just above the 1.07 handle, close to the multi-year lows hit earlier in 2015.

The dollar was boosted after minutes from the Fed’s latest policy hinting released on Wednesday pointed to a rate hike, the first in almost a decade, in December.

Meanwhile, minutes from the last ECB meeting showed a clear divergence with the US central bank as policymakers attempt to stimulate inflation in the 19-nation bloc.

Mario Draghi, the head of the central bank, reiterated previously voiced views that the bank would expand quantitative easing if required. In a speech Friday he said that “we will do what we must to raise inflation as quickly as possible”.

He added: “In making our assessment of the risks to price stability, we will not ignore the fact that inflation has already been low for some time.”

Sterling held firm against the dollar, with GBP/USD just below the 1.53 handle, near its best level in two weeks.

Elsewhere, stocks in Europe were treading water on Friday after a strong session in Tokyo overnight saw Japanese equities rise to a three-month high.

The Nikkei 225 closed up 0.1 per cent higher to 19,879.81, capping a weekly rise of 1.4 per cent. In Hong Kong, the Hang Seng index closed up 1.1 per cent at 22,754.72.

In commodities, oil recovered from early losses in the session to climb off recent lows. US light crude was up 0.25 per cent at $41.82 a barrel, while Brent rose 0.4 per cent to $44.36.

Gold edged higher but the upside was seen limited on speculation the Fed is preparing to tighten policy next month.

On the Comex in New York, gold futures for December delivery were up 0.65 per cent at $1,084.70.