US dollar gains momentum

The US dollar received a major boost after Chair of the Federal Reserve Janet Yellen confirmed before her testimony in the congress that the Fed will hike rate in later this year, National Bank of Kuwait (NBK) reported on Sunday.

Last week, Yellen repeated her view, before the congress, that the Fed would likely hike interest rates later this year if the US economy expanded as expected, the report added.
It noted that Yellen expected economic recovery to strengthen over the remainder of this year and the unemployment rate to decline gradually.

In addition, she noted, "economic growth abroad could also pick up more quickly than observers generally anticipate, providing additional support for US economic activity." Meanwhile, US retail sales unexpectedly fell in June as households cut back on purchases of automobiles and a range of other goods, raising concerns the economy might be slowing again, the report noted.

The Commerce Department said retail sales slipped 0.3 percent last month, the weakest reading since February, after May's downwardly revised 1.0 percent increase. Small business optimism index also suffered coming at 94.1 compared to expectations of 98.5.
The reprot also added that the number of Americans filing new applications for unemployment benefits dropped more than expected last week.

Initial claims for state unemployment benefits dropped 15,000 to a seasonally adjusted 281,000 for the week ended July 11. It was the 16th straight week that the four­week moving average of claims held below 300,000, a threshold normally associated with a firming labor market.
In Europe, the Greek parliament passed austerity measures demanded by lenders to open talks on a third financial rescue package worth up to 86 billion euros to keep Greece in the Eurozone.

In exchange for the multibillion­euro bailout package, Greece has accepted reforms including substantial pension adjustments, increases to value added taxes and tight limits on public spending. It has also agreed to sequester 50 billion euros of public assets in a special privatization fund to act as collateral on the deal. The European Central Bank kept the main refinancing rate at 0.05 percent at its meeting in Frankfurt on Thursday.
The deposit rate and the marginal lending rate stayed at minus 0.2 percent and 0.3 percent, respectively, the report said.

Furthermore, the ECB confirmed that it will continue its quantitative easing program by purchasing 60 billion euros worth of assets till the end of September next year.
The ECB believes that it can sustain inflation rates close to 2 percent in the medium­term by fully implementing all of its monetary policy measures.
In Asia, The Shanghai index rose more than 13 percent in the past week, after falling nearly a third in less than a month. Although the market has been up for the past couple days, it remains that over 1000 companies are still halted from trading after the emergency measures taken by Beijing, particularly the ban on selling of shares by major stakeholders and the enabling of many companies to halt shares.

The Chinese stock market rally continues helped by better than expected Chinese trade data. Indeed, exports came at 2.1 percent year on year versus 1.2 percent expected by economists. Imports also came on the weaker side at ­6.7 percent versus expectations of ­16.2 percent.