Yellen says Fed watching slowdown in inflation

USA-FED

USA stocks were higher in late morning trading on Wednesday, with the Dow hitting a record, after Federal Reserve Chair Janet Yellen said interest rates hikes would be gradual and will not have to rise much further to reach the neutral rate.

The Fed also expects that "the ongoing strength in the economy will warrant gradual increases in the federal funds rate", noting that economic activity increased at a moderate pace over the first half of the year and the job market continued to strengthen, according to the report.

In remarks prepared for her speech, U.S. central bank chair Janet Yellen pointed out that the unemployment rate had fallen "modestly" below the Fed's estimate of its sustainable long-term level.

Meanwhile, the Canadian dollar was little changed against its US counterpart while investors awaited a Bank of Canada interest rate decision on Wednesday.

Just a day earlier came comments from Fed Governor Lael Brainard saying that a low-neutral rate over the medium term means that the Fed wouldn't have much more additional work to do on moving toward a neutral stance.

Yellen's speech will be closely watched for assessments on the U.S. economy and the outlook of the Fed's monetary policy in the course of the year. The global economy has also improved, although economic challenges remain, she added.

President Donald Trump's eldest son released emails last night that cast another cloud over his father's presidency and sent the dollar lower against most of its major peers.

On Monday data showed that exports from Germany, the biggest economy in Europe, increased stronger than was expected during May.

MSCI's all-country world stock index fell 0.11pc, while the pan-European FTSEurofirst 300 index of leading regional shares slid 0.71pc to a provisional close of 1,490.15.

The greenback advanced to near a 2-week high of 1.2858 against the pound, after having declined to 1.2908 at 2:00 am ET.

Unemployment in the United Kingdom fell to a 42-year low in the three months to May, figures out today showed. Likewise, the Reserve Bank of New Zealand has signalled it doesn't intend to hike rates anytime soon.

The figure was the lowest since 1975.

Biopharmaceutical company Cara Therapeutics (CARA) may also see early strength after releasing positive results from its Phase 1 safety and pharmacokinetic trial of Oral CR845 in chronic kidney disease patients undergoing hemodialysis. On the downside, 1.16 is likely as the next support level for the greenback.

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