Forex
Dollar steady ahead of inflation data; sterling slips after job numbers
Investing.com – The U.S. dollar steadied Tuesday, largely drifting ahead of the release of key inflation data that are likely to factor into the outlook for interest rates.
At 03:30 ET (08:30 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, edged 0.1% higher to 105.250, in rangebound trading.
Dollar calm ahead of key inflation data
The dollar, like the foreign exchange market as a whole, has seen calm trading at the start of this week, as traders await the release of the latest U.S. inflation data, which will likely dictate near-term sentiment regarding potential rate cuts.
The April is due later Tuesday, ahead of Wednesday’s crucial CPI report which is expected to show rose 0.3% month-on-month in April, less than 0.4% growth the prior month.
The Federal Reserve has made it clear any potential rate cuts are data dependent, and sticky inflation has resulted in the pricing in of just 42 basis points of easing this year, with a 60% chance of a cut in September, according to CME FedWatch tool.
A hotter-than-expected inflation reading would likely price out rate cuts for the rest of the year.
“Today’s PPI and tomorrow’s CPI figures will tell us whether the US has made further steps in the disinflation process, or if prices remain too sticky for the Federal Reserve to cut,” said analysts at ING, in a note.
“The latter seems more likely, and a consensus call too – which could leave FX markets without much sense of direction and volatility still depressed.”
remove ads
.
Sterling falls after weak jobs data
In Europe, fell 0.3% to 1.2523, after the release of the latest U.K. jobs data showing that the country’s rose to its highest level in almost a year.
The UK unemployment rose to 4.3% in the three months to March – the highest since May to July last year and up from 4.2% in the previous three months.
This would strengthen the idea of rate cuts in the near future, but complicating the issue for the Bank of England was the news that wage growth in the country remained strong.
, excluding bonuses, remained at 6%, continuing to outstrip inflation. It had been expected to slow to 5.9% between January and March.
traded 0.1% lower to 1.0778, after the latest showed that inflation looks under control in the eurozone’s largest economy.
German CPI rose 2.2% on an annual basis in April, only marginally above the European Central Bank 2% medium-term target.
The ECB is widely expected to start cutting interest rates from a record high in June, and markets now see up to three rate cuts this year, or two beyond June, most likely in September and December.
Yen still under intervention watch
In Asia, rose 0.2% to 156.44, with the pair having recouped a bulk of its losses made earlier in May, when the government was seen intervening in currency markets on two separate occasions.
While traders saw 160 as the new line in the sand for government intervention, USDJPY’s rapid ascent, despite the threat of intervention, has sparked fears that the government may intervene sooner.
remove ads
.
rose 0.1% to 7.2377, with the yuan still weak as a prolonged slump in the property market has been a key point of pressure on the Chinese economy, despite repeated efforts from Beijing to support the sector.
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.
Forex2 years agoForex Today: the dollar is gaining strength amid gloomy sentiment at the start of the Fed’s week
- Forex2 years ago
How is the Australian dollar doing today?
- Forex2 years ago
Dollar to pound sterling exchange rate today: Pound plummeted to its lowest since 1985
- Forex2 years ago
Unbiased review of Pocket Option broker
- Cryptocurrency2 years ago
What happened in the crypto market – current events today
- World2 years ago
Why are modern video games an art form?
- Commodities2 years ago
Copper continues to fall in price on expectations of lower demand in China
- Forex2 years ago
The dollar is down again against major world currencies
