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Forex

Dollar higher on US business activity boost

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By Saqib Iqbal Ahmed

NEW YORK (Reuters) -The dollar rose against the euro on Thursday after data showed U.S. business activity accelerated to the highest level in just over two years in May, suggesting that economic growth picked up half-way through the second quarter.

S&P Global said that its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, jumped to 54.4 this month. That was the highest level since April 2022 and followed a final reading of 51.3 in April.

A reading above 50 indicates expansion in the private sector.

“The currency action shows the market still responds to strong U.S. economic data in the expected way,” said Marc Chandler, chief market strategist at Bannockburn Global Forex LLC.

“I think the dollar has some more room on the upside,” Chandler said.

Data on Thursday also showed the number of Americans filing new claims for unemployment benefits fell last week, pointing to underlying strength in the labour market that should continue to support the economy.

Federal Reserve officials at their last policy meeting said they still had faith that price pressures would ease at least slowly in coming months, but doubts emerged about whether the current level of interest rates was high enough to guarantee that outcome and “various” officials said they’d be willing to hike borrowing costs again if inflation surged.

“Given the FOMC comments the market is still exaggerating the chances of two rate cuts this year,” Chandler said, noting that the unwinding of rate cut bets would keep the dollar supported in the near term.

The euro was down 0.2% at $1.080525. The common currency rose as high as $1.0861 earlier in the session after the preliminary composite Purchasing Managers’ Index for the currency bloc came in above the 50 level separating growth from contraction for the third month in a row, with even struggling manufacturing showing a recovery.

Better-than-feared economic data for the past few months helped the euro rally in April and early May, and Thursday’s data pushed the currency back towards mid-May’s two-month high of $1.0895.

“The EU PMI figures took a little pressure off of the stagflation theme, but it still feels a little stagflation ‘lite’ if you will, and we need to see more on the growth side there,” Brad Bechtel, global head of FX at Jefferies, said in a note.

The pound slipped 0.2% to $1.2689 against the dollar. Prime Minister Rishi Sunak on Wednesday called a national election, which his Conservatives are widely expected to lose to the opposition Labour Party after 14 years in power. However, sterling options volatility for the period covering the July 4 election did rise. [GBP/]

“The market is fairly confident there’s going to be a Labour government and it’s pretty confident also that the Labour government won’t be that different in terms of fiscal policy, than the current Sunak and (finance minister Jeremy) Hunt mix anyway,” said Jane Foley, head of FX strategy at Rabobank.

The dollar was 0.1% higher against the Japanese currency at 156.91 yen after data showed Japan’s factory activity crept into expansion for the first time in a year in May.

The corporate sector in Japan has been grappling with the weak yen, and nearly half of Japanese firms find the yen’s slide beyond 155 to the dollar harmful to their business, roughly double the percentage of those who see the currency’s weakness as a positive, a Reuters survey showed on Thursday.

The New Zealand dollar slipped 0.1% to $0.60925after data released Thursday showed that retail sales volumes in New Zealand unexpectedly rose, its second day of gains after the Reserve Bank of New Zealand surprised markets on Wednesday by lifting its forecasts for peak interest rates and pushing back when it expects to cut. {AUD/]

© Reuters. FILE PHOTO: U.S. Dollar banknote is seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/File photo

Among cryptocurrencies, ether was up 1% at $3,776, after rising as high as $3945.50 its highest since mid-March.

It has been surging amid speculation over the potential approval of U.S. spot exchange-traded funds that would track the world’s second-biggest cryptocurrency.

Forex

Yen drifts lower from 2-1/2-month peak vs dollar as markets stabilize

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By Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) -The yen edged lower from a 2-1/2-month high against the U.S. dollar on Thursday, as financial markets stabilized, with investors looking ahead to next week’s Bank of Japan meeting which could see a potential rate hike.

The Japanese unit this week rallied sharply as market participants unwound their long-held bets against the currency. At the same time, a plunge in global stocks in recent sessions had driven investors toward traditionally safe assets such as the Swiss franc and yen.

U.S. equities, however, recovered on Thursday after a steep sell-off in the previous session.

For the week, the yen has risen 2.4%, on track for its best weekly gain since late April. The greenback was last slightly down at 153.84 yen.

The dollar, however, trimmed losses against the yen and euro after data showed the world’s largest economy expanded faster than expected and inflation slowed in the second quarter. That reduced brewing expectations of a larger-than-expected rate cut in September, or a sudden Federal Reserve easing at next week’s meeting.

“The Japanese yen is flatlining on diminished safe-haven demand, and the speculative fervor behind its recent bull run seems to be running out of steam,” said Karl Schamotta, chief market strategist at Corpay in Toronto.

“We think markets have gotten a little too far over their skis given that underlying economic fundamentals don’t yet support a rapid tightening cycle from the Bank of Japan, and that rate differentials will remain wide even if the Fed begins cutting in coming months.”

The rate futures market has priced in a 67.2% chance that the BOJ will raise rates next week by 10 basis points (bps), up from about 40% earlier in the week, according to LSEG estimates.

The euro was slightly up against the dollar at $1.0846 , with the flat at 104.36. The index was at 104.21 just before the release of economic growth data.

Advance estimates showed that U.S. gross domestic product (GDP) grew at a 2.8% annualized rate in the last quarter. Economists polled by Reuters had forecast GDP rising at a 2.0% rate.

The personal consumption expenditures (PCE) price index, excluding the volatile food and energy components, increased at a 2.9% rate after surging at a 3.7% pace in the first quarter.

Against the Swiss franc, the dollar dropped 0.5% to 0.8806 francs.

AHEAD OF ITSELF

“The market got ahead of itself on Fed cuts. Before the GDP number, the market is pricing as if the Fed is going to cut 50 basis points in September,” said Marc Chandler, chief market strategist at Bannockburn Forex in New York.

He also cited comments from former New York Fed President Bill Dudley in a Bloomberg column on Wednesday, who said the Fed should cut rates next week, citing recent employment data.

“The GDP number shows that the Fed is not under that kind of urgency,” Chandler said.

The Fed remains firmly on track to cut interest rates in September, according to fed funds futures data. The futures market has also priced in about 68 basis points (bps) of cuts this year, based on LSEG calculations.

U.S. jobless claims data were also consistent with an economy still holding up well.

Initial claims for state unemployment benefits dropped 10,000 to a seasonally adjusted 235,000 for the week ended July 20, the data showed. Economists polled by Reuters had forecast 238,000 claims for the latest week.

The only blemish, however, was the U.S. durables report, which showed durable goods orders fell 6.6% in June on slumping transportation orders, compared with expectations for a 0.3% rise.

In other currencies, the Australian dollar fell to US$0.6519, its lowest since early May. It was last down 0.6% against the greenback at US$0.6541.

rallied against the dollar, which fell to its lowest since early May at 7.205, as the yen’s rally spilled over to the Chinese unit. The dollar was last down 0.2% at 7.245

Currency              

bid

prices at

25 July​

07:28

p.m. GMT

Descripti RIC Last U.S. Pct YTD Pct High Low

on Close Change Bid Bid

Previous

Session

Dollar 104.31 104.38 -0.05% 2.90% 104.45 104.

index 07

Euro/Doll 1.0852 1.084 0.12% -1.68% $1.087 $1.0

ar 829

Dollar/Ye 153.9 153.86 0.01% 9.09% 154.3 151.

n 96

Euro/Yen 1.0852​ 166.79 0.13% 7.31% 167.59 164.

83

Dollar/Sw 0.8806 0.8852 -0.53% 4.62% 0.8854 0.87

iss 78

Sterling/ 1.2861 1.2906 -0.33% 1.08% $1.2913 $1.0

Dollar 829​

Dollar/Ca 1.3808 1.3808 0% 4.16% 1.385 1.37

nadian 97

Aussie/Do 0.6549 0.6582 -0.46% -3.92% $0.6582 $0.6

llar 511

Euro/Swis 0.9554 0.9594 -0.42% 2.89% 0.9598 0.95

s 22

Euro/Ster 0.8435 0.8397 0.44% -2.69% 0.8439 0.83

ling 95

NZ 0.5893 0.593 -0.68% -6.8% $0.593 0.58

Dollar/Do 73

llar

Dollar/No 11.0151​ 11.0265 -0.1% 8.68% 11.1381 10.9

rway 83

Euro/Norw 11.9548 11.953 0.02% 6.49% 12.0856 11.9

ay 317

Dollar/Sw 10.8111 10.7772 0.31% 7.39% 10.8685 10.7

eden 65

© Reuters. FILE PHOTO: Banknotes of Japanese yen are seen in this illustration picture taken September 22, 2022. REUTERS/Florence Lo/Illustration/File Photo

Euro/Swed 11.7314 11.6822 0.42% 5.45% 11.7786 11.6

en 784

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Forex

Citi sees potential for USD/JPY tactical longs amid strong US GDP data

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Citi highlighted the Japanese yen’s major support level against the US dollar, noting that the pair had maintained its position above the 152 mark.

This level was previously identified as a significant resistance point throughout 2022 and early 2023, and it served as a crucial breakout area in 2024. Additionally, the 200-day moving average (200dma) is positioned just below this threshold at 151.54.

The firm observed that the stronger-than-expected US GDP and Core Personal Consumption Expenditures (PCE) figures released today, coupled with their anticipation of a hawkish Federal Reserve and no change in policy from the Bank of Japan (BoJ), present an attractive risk/reward scenario for investors considering tactical long positions in the USDJPY pair heading into next week.

Citi clarified that this recommendation is tactical in nature, given their broader expectation of a risk-off environment with heightened volatility over the coming months. They suggest that while high volatility can lead to aggressive counter-trend movements, it is also an opportunity to capitalize on.

Looking ahead, Citi anticipates better opportunities to sell the USDJPY pair, which may arise soon. They speculate that a rally to the 55-day moving average (55dma), which stands at 157.75, could offer appealing levels for selling if it materializes.

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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Forex

Dollar slips ahead of GDP data; euro rises and yen surges

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Investing.com – The U.S. dollar slipped lower Thursday, the euro posted small gains while the Japanese yen climbed to multi-month highs ahead of next week’s Bank of Japan meeting.  

At 05:25 ET (09:25 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, fell 0.2% to 103.950, extending an overnight decline.

Dollar slips ahead of GDP data

The dollar retreated Thursday, extending an overnight decline amid increasing confidence that the will cut interest rates in September.

data for the second quarter are due later in the session, and is expected to show annualized growth of 2.0%.

This would be above the 1.4% growth seen in the first quarter, but would remain considerably slower than the 4.2% pace seen in the second half of last year.

The release will also show inflation slowed considerably last quarter, with the GDP price index falling to 2.6% from 3.1%, ahead of Friday’s price index data, the Federal Reserve’s favored gauge of inflation.

The Fed is set to meet next week, and is widely to keep interest rates steady while signaling a rate cut in September. 

German business morale falls again

In Europe, rose 0.1% to 1.0847, with the euro edging higher despite German business morale unexpectedly falling in July, the third consecutive decline in Germany’s most prominent leading indicator..

The Ifo institute said its sank to 87.0 in July from 88.6 in June.

“The German economy is stuck in the crisis,” said Ifo president Clemens Fuest.

The kept interest rates on hold at 3.75% last week, but markets are pricing in just short of two more ECB rate cuts for the rest of this year.

traded 0.2% lower at 1.2885, falling back from the 1.30 level ahead of next week’s Bank of England policy-setting meeting.

UBS expects the central bank to trim interest rates in what is widely seen as a close call as to when it will start what is likely to be a slow and steady reduction path.

Yen goes from strength to strength 

In Asia, fell 0.7% to 152.72, with the pair falling to its weakest level in 2-1/2 months as traders abandoned short yen bets in the run up to the BOJ’s July meeting in the wake of suspected currency market intervention by the Japanese government.

The is expected to consider a 10 basis point hike, and could unveil a plan to roughly halve bond purchases in coming years.

“USD/JPY has now corrected 6% off its high. This has proved another successful intervention campaign for Japanese authorities,” said analysts at ING, in a note. 

“We think the success of the intervention has had less to do with the size of the FX sales and more to do with the timing. As was the case in September/October 2022, Japanese FX intervention has been timed to coincide with a dovish reappraisal of Fed policy. Very clever.”

slipped 0.5% lower to 7.2281, but remained near an eight-month high amid persistent concerns over a slowing economic recovery in the country. Surprise rate cuts by the People’s Bank added to pressure on the currency and did little to lift spirits over the Chinese economy.

 

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