The U.S. Federal reserve is beginning a two-day meeting later on Tuesday, and traders are expecting interest rates to remain stable, with a possibility that the next increase will come in June. There’s no question that the Fed is on its first policy-tightening spree in more than ten years, but analysts worry that inconsistent policy from the Trump administration and a slow growth of only 0.7 percent in the first quarter of 2017 will keep interest rates stable for at least another month.
Reports out on Monday showed that U.S. factory activity diminished in April, with the ISM manufacturing index falling from 57.2 in March to 54.8 in April, a fairly substantial decrease. Jobs growth also slowed considerably in March even though unemployment is at a ten-year low, giving the Fed pause before their next tightening measure. The slow jobs growth is largely attributed to weather conditions, which analysts expect will be reversed in the coming months.
Chinese Reports Equally Weak
China’s factory sector also posted weak results in April, with growth slowing to its weakest pace in seven months on decrease domestic and international demands. The Caixin/Markit Manufacturing Purchasing Managers’ index fell from March’s level of 51.2 to 50.3 p, missing economists’ forecasts.
Despite China’s weak data Asian shares plowed higher on Tuesday, hitting near two-year highs as growing optimism for the tech industry kept traders interested. Japan’s Nikkei gained -.7 percent on Tuesday morning and MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.5 percent.
The dollar hit one-month highs against the yen during Tuesday’s Asian session, up to 112.04. The euro traded flat for a second-straight day, remaining in range at $1.0198.