European stock markets edged higher Wednesday as the dollar continued its advance against the euro and the pound, after further hawkish comments from U.S. Federal Reserve Chair Janet Yellen.
KEEPING SCORE: In Europe, the FTSE 100 index of leading British shares was up 0.4 percent at 7,312 while Germany’s DAX rose 0.5 percent to 12,664. The CAC 40 in France was 0.2 percent higher at 5,278. U.S. stocks were poised for a solid opening too with Dow futures and the broader S&P 500 futures 0.2 percent higher.
DOLLAR DRIVER: The dollar has been one of the main drivers across financial markets in recent days. The U.S. currency has been largely buoyed by expectations of further interest rate rises from the Fed. In a speech Tuesday, Yellen indicated that it would not be prudent to leave rates on hold until inflation reaches 2 percent. The rise in the dollar makes European goods more competitive in U.S. markets. On Wednesday, the euro was down 0.5 percent at $1.1734 while the pound fell 0.5 percent to $1.3396.
ANALYST TAKE: “While this doesn’t mark a change in the message delivered last week, it does reinforce the view that tightening will continue despite inflation running below target and currently showing little sign of improving,” said Craig Erlam, senior market analyst at OANDA.
U.S. POLITICS WATCH: Traders are also watching political developments in Washington where House Republicans and Trump administration officials are due to give details of long-awaited tax proposals. These are expected to reduce individual and corporate tax rates. While analysts expect not much will be done immediately, with the absence of other headline-dominating news, it will still be the key event.
ASIA’S DAY: Asian markets closed mostly lower. Japan’s Nikkei 225 fell 0.3 percent to 20,267.05 and South Korea’s Kospi dipped less than 0.1 percent to 2,372.57. Australia’s S&P/ASX 200 lost 0.1 percent to 5,664.30. But Hong Kong’s Hang Seng index rose 0.5 percent to 27,642.43. China’s Shanghai Composite Index added 0.1 percent at 3,345.27.
OIL: Benchmark U.S. crude rose 4 cents to $51.92 per barrel on the New York Mercantile Exchange while Brent crude, the standard for international oil prices, fell 9 cents to $57.83 a barrel in London.