Forex
Dollar edges higher against major currencies as traders weigh US data
By Chibuike Oguh and Alun John
NEW YORK/LONDON (Reuters) -The U.S. dollar was flat against major currencies on Friday as markets digested a slew of economic data that supported the Federal Reserve’s current monetary policy path.
A gauge of U.S. producer prices was unchanged in September, the Labor Department reported, the latest economic data to indicate the Fed will likely cut rates again next month.
Consumer prices in September rose 0.3%, according to data released on Thursday, slightly hotter than expected, while weekly jobless claims surged, pointing to labor-market weakness. The weekly jobless claims data was skewed by Hurricane Helene. Next week’s data will be affected by Hurricane Milton, the second hurricane in two weeks to hit the southeast U.S.
The euro was flat at $1.1093, the pound was up 0.08% at $1.3072, while the dollar was up 0.35% against the Japanese yen at 149.12.
The was flat at 102.91, taking a breather after a recent steady climb that took it above 103 on Thursday, its highest since mid-August on the back of traders reducing bets on further jumbo interest-rate cuts by the Federal Reserve at its remaining meetings this year.
Markets are betting a nearly 91% chance of a 25-basis-point cut at the Fed’s next meeting and 9% probability of no cut, according to the CME’s Fedwatch tool.
“That slightly higher inflation print has really backed the market away from being overly aggressive on how deep they were looking for the interest-rate cuts to go by the end of the year,” said Amarjit Sahota, executive director at Klarity FX in San Francisco. “So there was already an overprice in there and that’s basically unwound this week.”
Britain’s economy grew in August after two consecutive months of stagnation, providing some relief to finance minister Rachel Reeves ahead of the new Labour government’s first budget later this month.
However, in addition to being broadly steady on the dollar the pound was little changed on the euro at 83.67 pence to the common currency.
Traders are also watching French politics, after the government on Thursday delivered its 2025 budget with plans for 60 billion euros ($65.5 billion) worth of spending cuts and tax hikes on the wealthy and big companies to tackle a soaring fiscal deficit.
The budget is unlikely to pass until December, as French Prime Minister Michel Barnier and his allies in President Emmanuel Macron’s camp lack a majority by a sizeable margin and will have little choice but to accept numerous concessions.
Markets are also awaiting a news conference from China’s finance ministry on fiscal policy on Saturday. The strengthened 0.22% against the greenback to 7.067 per dollar.
The Australian dollar strengthened 0.22% versus the greenback to $0.6753, while the New Zealand dollar was at $0.611 after the central bank on Wednesday slashed rates by a half point and hinted at further cuts to come.
In cryptocurrencies, bitcoin gained 5.38% to $62,930.00. rose 3.8% to $2,456.70.
“The market is satisfied because there’s nothing there that really tells against the narrative that the Fed is cutting; the only debate is how fast they’re going to cut,” said Steven Englander, head of Global G10 FX Research at Standard Chartered (OTC:) in New York.
“Overall, the data have been slightly encouraging to that narrative and none of the data have been discouraging to the narrative that the Fed is cutting rates.”
Currency bid prices at 11 October 07:51 p.m.
GMT
Description RIC Last U.S. Close Previous Session Pct Change YTD Pct High Bid Low Bid
Dollar index 102.91 102.89 0.02% 1.52% 102.99 102.76
Euro/Dollar 1.0935 1.0938 -0.02% -0.93% $1.0953 $1.0927
Dollar/Yen 149.13 148.58 0.36% 5.72% 149.28 148.51
Euro/Yen 1.0935 162.48 0.37% 4.79% 163.4 162.32
Dollar/Swiss 0.8572 0.8563 0.11% 1.86% 0.8585 0.856
Sterling/Dollar 1.3068 1.3061 0.08% 2.72% $1.3082 $1.3042
Dollar/Canadian 1.3759 1.3742 0.13% 3.8% 1.3785 1.3726
Aussie/Dollar 0.6753 0.6742 0.19% -0.93% $0.6759 $0.6726
Euro/Swiss 0.9374 0.9364 0.11% 0.95% 0.9387 0.9363
Euro/Sterling 0.8367 0.8373 -0.07% -3.47% 0.8383 0.8365
NZ Dollar/Dollar 0.611 0.6095 0.27% -3.29% $0.6119 0.6072
Dollar/Norway 10.6961 10.7222 -0.24% 5.54% 10.7637 10.6837
Euro/Norway 11.6971 11.7412 -0.38% 4.22% 11.772 11.694
Dollar/Sweden 10.3693 10.3744 -0.05% 3% 10.4157 10.355
Euro/Sweden 11.3402 11.3617 -0.19% 1.93% 11.3883 11.3336
Investing.com – The US dollar has gained more ground as the US presidential election draws near, UBS noted, with the market seeing rising odds of a win for Republican candidate Donald Trump.
A new USD-positive over the past week has been media reports of somewhat better outlook for Donald Trump in the latest polls, as outcomes that allow for policies such as more aggressive tariffs are viewed as more USD positive.
“Higher odds of a Trump presidency are likely to be associated with a stronger USD near term,” said analysts at UBS, in a note dated Oct. 16.
Where does this leave us now with our USD views?
Our expected ranges between Sep–Dec 2024 incorporated the possibility of a material USD rebound between now and year end, even if our year-end forecasts see a modestly lower USD from current levels.
Last week, with an eye to our year end forecast, we entered a long call reverse knockout, but we are not willing to implement a similar trade yet for and .
The spot is still far enough from our range extremes and high JPY implied volatility and negative carry make long JPY positions unattractive so close to US elections.
Turning to this week’s ECB meeting, the market is very confident that another 25bp rate cut will be delivered and we do not have a strong reason to disagree.
Market expectations are very muted for any form of surprise, and risk reversal skews bid again for EUR puts point to a market that is already primed for the risk of EUR softness.
With market pricing in line with our economists’ terminal rate expectations, we see EUR/USD as more exposed to US developments near-term, leaving us reluctant to fade recent softness on ECB reasons alone.
At 06:30 ET (10:30 GMT), EUR/USD rose 0.1% to 1.0894, USD/JPY gained 0.1% to 149.34 and AUD/USD fell 0.2% to 0.6685.
Investing.com – The European Central Bank holds its latest policy-setting meeting later this week, and Citigroup advises selling any rallies in the euro around this key event.
Markets are pricing in around 49 basis points of easing over the remaining two ECB meetings this year, which could limit dovish repricing around Thursday’s event, according to analysts at Citi, in a note dated Oct. 15.
“We see scope for a tactical bounce in EUR around this Thursday’s ECB meeting, which we like fading into November as US election risk premium materializes,” Citi said.
That said, “we like fading any subsequent rallies in EUR as we approach November and US election risk premium gets better priced.”
There is some evidence of this unfolding, the bank added, as EUR looks undervalued on its short-term fair value model and as Citi’s FX Positioning data suggests adding to EUR shorts.
“But our broader FX election basket still screens as undervalued relative to Trump betting markets, and we remain short EURUSD in both spot and options,” says Citi. “We would look to sell any retest of the 1.10 double top neckline — any break above there risks a move towards our adjusted stop of 1.1050, but if that resistance holds, we have higher conviction of a move towards our (and the double top) target of 1.08, with potential overshoot towards 1.07.”
At 05:25 ET (09:25 GMT), traded largely flat at 1.0892, almost 2% lower over the last month.
Investing.com – The U.S. dollar edged higher Wednesday, trading near two-month peaks on expectations of modest rate cuts from the Federal Reserve this year, while sterling slumped after benign inflation data.
At 04:15 ET (08:15 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% higher to 103.180, remaining close to Monday’s two-month peak.
Dollar helped by trimmed rate cut expectations
Recent data indicating a resilient economy coupled with slightly hotter-than-expected inflation in September have led market participants to trim bets for an aggressive U.S. rate reduction.
Adding to these expectations were comments from Atlanta Federal Reserve President on Tuesday, who said he had penciled in just one more interest rate reduction of 25 basis points this year when he updated his projections for last month’s U.S. central bank meeting.
Most market participants see two more cuts this year, totaling 50 bps, and traders currently lay 92% odds for a 25-basis-point cut when the Fed next decides policy on Nov. 7, with an 8% probability of no change, according to CME Group’s (NASDAQ:) FedWatch Tool.
Sterling slumps after inflation release
In Europe, slumped 0.5% to 1.3003, after data showed British inflation fell more than expected in September, paving the way for a rate cut next month.
The UK’s fell to 1.7% on an annual basis, below the forecast 1.9% and the 2.2% recorded a month earlier.
This was the first time it had fallen below the Bank of England’s 2% target since April 2021, and added to data seen earlier in the week that showed British pay grew at its slowest pace in more than two years.
“The data is unequivocally dovish for the Bank of England and paves the way for rate cuts at the two remaining meetings this year (November and December),” said analysts at ING, in a note.
“Given the comments by Governor Andrew Bailey earlier this month suggesting the BoE could increase the pace of easing, markets may be tempted to price in some chance of a 50bp rate cut in November.”
traded 0.1% lower to 1.0882, ahead of Thursday’s policy-setting meeting by the European Central Bank.
The has already lowered rates twice this year and a cut to the 3.5% deposit rate this week is almost fully priced in by financial markets.
“EUR/USD is predominantly driven by external factors. The substantial drop in oil prices has narrowed the scope for a further drop based on market factors, but we continue to suspect that pre-US election positioning should favor a weaker EUR/USD,” said ING.
Yuan nurses weekly losses
fell slightly to 7.1179, with the yuan nursing losses this week as sentiment soured over the country’s plans for more stimulus.
China’s Ministry of Finance said it will enact a slew of fiscal measures to boost growth, but did not specify the timing or size of the planned measures, spurring uncertainty over its effectiveness.
rose 0.2% to 149.43, with the pair climbing closer to the 150 resistance level.
data due later this week is expected to offer more cues on the Bank of Japan’s plans to hike rates further.
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