Dollar slips lower ahead of key PCE release; euro near three-week high
The U.S. dollar drifted lower Friday, adding to recent weakness ahead of key inflation data as the case grows for a rate cut from the Federal Reserve next week.
At 04:10 ET (09:10 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% lower to 98.872, on course for a weekly loss of around 0.5%, hovering near a five-week low.
PCE release due
The U.S. dollar has been on the slide as traders position for a Federal Reserve rate cut next week, with recent data showing weakness in the key labor market.
That said, the economic picture remains cloudy following the record-long government shutdown, and the crucial monthly payrolls release, which would ordinarily be published later on Friday, has been delayed until after the Fed policymakers get together next week.
Instead, the focus Friday will be one of the Fed’s preferred inflation gauges - the PCE deflator - even though the data is for September.
Traders are pricing around 86% odds of a Fed cut next Wednesday, and potentially 2-3 more reductions next year, LSEG data showed.
Traders are also looking to see if U.S. President Donald Trump will appoint White House economic adviser Kevin Hassett to succeed Jerome Powell as head of the Federal Reserve early next year.
“For the big dollar, it remains slightly offered on the view that the Fed will cut rates next week and that the arrival of Kevin Hassett as Fed Chair will somehow make the Fed more dovish,” said analysts at ING, in a note.
Eurozone growth numbers due
In Europe, EUR/USD rose 0.1% to 1.1654, heading back towards Thursday’s three-week high of 1.1682.
German industrial orders rose more than expected in October, rising by 1.5% on the previous month, the federal statistics office said, ahead of the expected 0.4% gain.
The final release of third-quarter growth in the eurozone is due for release later in the session, and is expected to confirm annual gross domestic product growth of 1.4%, with a quarterly gain of 0.2%.
“We have a slight bias that EUR/USD trades to 1.1700/1730 and continues to find support in the 1.1630/40 area,” ING added.
GBP/USD gained 0.1% to 1.3348, approaching the previous session’s six-week peak of 1.3385.
Sterling has seen demand in the wake of the previous week’s annual budget, even as data has shown difficult economic conditions.
U.K. house prices held steady in November, showing no monthly change after a 0.5% rise in October, according to the latest Halifax House Price Index, released earlier Friday.
“Sterling continues to do well,” said ING. “We doubt this represents a major reassessment of U.K. sovereign risk, although we note that the 10-year Gilt swap spread has held onto its modest narrowing and is now at 48bp. This stood at 58bp in late September. We prefer to see the current sterling rally as a short squeeze.”
Bank of Japan in spotlight
In Asia, USD/JPY slipped 0.2% to 154.74, amid renewed expectations that the Bank of Japan could raise rates in December.
A Reuters report said the government was increasingly open to a move, while comments from Governor Kazuo Ueda were interpreted as less dovish, reinforcing speculation.
USD/CNY traded largely unchanged at 7.0704, while AUD/USD gained 0.3% to 0.6634, with the Australian dollar on course for weekly gains of around 1.3% after data showing signs of economic strength.
Source : Investing.com
