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Dollar edges lower, but remains elevated on global growth concerns

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Dollar edges lower, but remains elevated on global growth concerns
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Investing.com – The U.S. dollar edged lower in early European trade Wednesday, but remained near a six-month peak as global growth concerns weighed on risk appetite. 

At 03:20 ET (07:20 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% lower at 104.612, not far off the six-month high of 104.90 touched overnight. 

German factory orders slump; safe-haven dollar in demand

The dollar has given back some of its recent gains in early European trade Wednesday, but it remains near its highest levels since mid-March as a string of disappointing economic data releases resulted in traders seeking out this safe haven.

The weak data continued Wednesday, as slumped 11.7% on the month in July, much weaker than the fall of 4.0% expected.

Manufacturing data from Germany, Britain and the euro area showed declines on Tuesday, while their service sectors fell into contraction. 

rose 0.2% to 1.0737, having breached a three-month low of 1.0705 overnight, while climbed 0.2% to 1.2582, having also touched a three-month low late Tuesday.

Eurozone retail sales set to confirm trend

are due for release later in the session, and are  expected to have weakened in July, dropping 0.1% on the month in July, down 1.2% on an annual basis, as consumers in the region remain under pressure with inflation still elevated.

The meets next week, and a run of soft eurozone data has raised the likelihood that the bank’s officials will agree to a pause in the rate-hiking cycle, further weighing on the single currency.

The U.S. is also seen holding steady later this month, with Fed Governor saying on Tuesday the latest round of economic data gives the U.S. central bank space to see if it needs to raise interest rates again.

There is the release of data later in the session which could provide more information about the health of the U.S. economy.

Yen remains near 10-month low

fell 0.3% to 147.27, with the yen recovering slightly from a 10-month low hit earlier in the session.

Japanese officials once again warned markets on betting against the currency, with top currency diplomat Masato Kanda telling reporters that the government “won’t rule out any options” if speculation against the yen persists. 

Japanese authorities intervened to support the currency after it hit 30-year lows last year, and the market is awaiting similar action as the pair gradually heads towards the 150 level.

rose 0.1% to 7.3087, crossing the 7.3 mark and hitting its weakest level to the dollar since November 2022 as markets continued to fret over a slowing economic recovery in the world’s second-largest economy.

rose 0.1% to 0.6384, with the Aussie dollar helped by data showing grew slightly more than expected in the second quarter, easing concerns over a recession.

 

Forex

Asia FX weakens as dollar recovers amid waning rate cut cheer

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Investing.com– Most Asian currencies retreated on Friday as the dollar recovered a measure of recent losses after a string of Federal Reserve officials warned that bets on interest rate cuts may be premature. 

While the greenback was still headed for some weekly losses, it was trading well above a one-month low hit on Thursday. U.S. Treasury yields also rebounded, pressuring risk-driven markets.

Regional factors also weighed on Asian currencies, as economic data from China and Japan underwhelmed.

Chinese yuan weak amid mixed economic prints 

The Chinese yuan’s pair rose 0.1%, moving back to six-month highs above 7.22.

Economic readings from the country continued to offer middling signals on an economic recovery. Data on Friday showed grew more than expected in April.

But other readings showed growth in slowed sharply, while a decline in Chinese accelerated last month. 

Chinese also grew less than expected in April, while fell from a seven-month high, but still remained relatively high. 

The readings presented a mixed outlook for Asia’s biggest economy. They also came after the U.S. imposed higher tariffs on key Chinese industries, sparking fears of a reignited trade war between Beijing and Washington. 

Concerns over China weighed on other currencies with trade exposure to the country. The Australian dollar’s pair fell 0.2%, while the South Korean won’s pair rose 0.7%. 

The Singapore dollar’s pair rose 0.1% after the island state’s grew at a slower-than-expected pace in April, and also contracted sharply from last year. 

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Weakness in the Japanese yen deepened after weaker-than-expected gross domestic product data for the first quarter. The pair rose 0.3% and was close to breaking above 156, extending sharp overnight gains.

Dollar recoups most weekly losses as Fed downplays rate cuts 

The and rose 0.2% each in Asian trade, extending an overnight rebound from one-month lows.

The dollar’s recovery came as several Fed officials, specifically members of the bank’s rate-setting committee, said that they needed much more confidence that inflation was coming down, beyond some easing inflation in April.

This saw traders scale back bets on a September rate cut, albeit slightly, according to the . 

Still, the dollar was set to lose about 0.7% this week, following some softer-than-expected data for April. The reading, coupled with soft data pushed up hopes that inflation will cool in the coming months.

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Dollar steadies, but on track for sharp weekly loss

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Investing.com – The U.S. dollar edged higher in European trade Friday, but was on track for a hefty weekly fall after cooling inflation and weak retail sales brought Federal Reserve rate cuts back into focus. 

At 04:10 ET (08:10 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.2% higher at 104.580, marginally above a five-week low just below 104 seen earlier this week.

Dollar steadies after hawkish Fed speak

The dollar has recovered to a degree as several Fed officials, specifically members of the bank’s rate-setting committee, said that they needed much more confidence that inflation was coming down, beyond some easing inflation in April.

“I now believe that it will take longer to reach our 2% goal than I previously thought,” St. Louis Federal Reserve president Loretta Mester said on Thursday, adding that further monitoring of incoming data will be needed. 

Federal Reserve Bank of New York President John Williams agreed with this view. 

“I don’t see any indicators now telling me … there’s a reason to change the stance of monetary policy now, and I don’t expect that, I don’t expect to get that greater confidence that we need to see on inflation progress towards a 2% goal in the very near term,” Williams said.

However, the dollar is still on course for a weekly loss of around 0.7% after the milder than expected U.S. data raised expectations the will deliver two interest rate cuts this year, probably starting in September.

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U.S. were also flat in April and softer-than-expected, and manufacturing output unexpectedly fell.

“Our view for the near term remains that we could see a further stabilisation in USD crosses as markets await the next key data input: April core PCE on 31 May,” said analysts at ING, in a note.

Euro slips ahead of CPI release

In Europe, traded 0.1% lower to 1.0860, having traded as high as 1.0895 in the wake of U.S. inflation release, but the single currency is still up around 0.9% on the dollar this week.

The final reading of the is due later in the session, and is expected to show inflation rose by 2.4% on an annual basis in April.

The is widely expected to cut interest rates in June, but traders remain unsure of how many more cuts, if any, the central bank will agree to over the course of the rest of the year.

Traders have priced in 70 basis points of ECB cuts this year – a lot more than the just under 50 bps of easing priced in for the Fed.

fell 0.1% to 1.2658, but is still on track for gains of around 1% this week.

The Bank of England is also expected to cut rates from a 16-year high this summer, but volatility is likely to be limited ahead of the release of key U.K. inflation figures next week.

Yen slips after weak Japanese GDP data

In Asia, rose 0.3% to 155.87, close to breaking above 156, after weaker-than-expected Japanese data for the first quarter. 

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traded 0.1% higher at 7.2209, moving back to six-month highs above 7.22 after data earlier Friday showed grew more than expected in April, but growth in slowed sharply, while a decline in Chinese house prices accelerated last month.

 

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ING anticipates EUR/GBP rise as BoE rate cut bets increase

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Broker ING noted the potential downside risks for the British pound, noting the currency’s recent decline from its peak against the euro. The GBP’s sensitivity to the performance of US equities was highlighted as a contributing factor to its movement.

The firm also observed a decrease in volatility for the pair as the market anticipates the release of key Consumer Price Index (CPI) figures in the UK scheduled for next week.

ING’s UK economist suggests that there may be a dovish tilt in expectations for the Bank of England’s (BoE) monetary policy. The firm maintains a favorable outlook on the possibility of the EUR/GBP pair rising, as market participants might increase their wagers on a potential interest rate cut by the BoE in June.

The British financial markets were focused on a speech delivered by Catherine Mann of the BoE, who is regarded as the most hawkish member of the Monetary Policy Committee (MPC).

This event followed comments made by Megan Greene, who recently shared a cautiously optimistic perspective on inflation, mirroring sentiments expressed by BoE Governor Andrew Bailey at the last meeting.

ING’s commentary comes as investors and analysts closely watch the central bank’s moves, which could significantly influence currency valuations. The anticipation of UK CPI data and the BoE’s potential response are key factors in the firm’s analysis of the GBP’s trajectory.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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