Dollar Resumes Gains on Solid Data, Aussie Slumps
A dollar gauge was gaining on Thursday as retail sales for June came in stronger than expected and weekly initial jobless claims were below estimates. All currencies in the Group of 10 were weaker against the greenback with the Australian dollar lagging all peers.
The Bloomberg Dollar Spot Index traded 0.3% higher; it’s now on track for a second weekly gain for the first time since May.
“The market has been expecting US tariffs to bite the domestic economy, which is one of the reason why the USD has performed poorly until recently,” said Yusuke Miyairi, a foreign-exchange strategist at Nomura. “But that seems to be becoming more like a ‘hope’ rather than an expectation, as the US data haven’t shown any strong indication of a growth weakness”.
The rebound comes after a drop in the previous session when President Donald Trump floated the idea of firing Fed Chair Jerome Powell.
“I think political pressure against Fed Chair Powell pose a bigger challenge to the Fed’s credibility,” said Elias Haddad, a strategist at Brown Brothers Harriman & Co. “USD should be trading much higher based on rate differentials alone”.
“The gap probably reflects loss of confidence in US policy,” he said.
Trump said he would send letters to more than 150 countries notifying them their tariff rates could be 10% or 15%.
USD/JPY advanced 0.5% to 148.57; currency strategists are preparing for more weakness in the yen if Japanese Prime Minister Shigeru Ishiba’s ruling bloc loses its majority in the upcoming upper house election
Japan’s government is concerned about moves in the currency market, including speculative ones, Deputy Chief Cabinet Secretary Kazuhiko Aoki says.
“A significant win for the opposition could weigh on the JPY, likely pushing USD/JPY near 150 amid policy uncertainty and risks of fiscal slippage,” wrote Chidu Narayanan, strategist at Wells Fargo.
“A victory for the LDP coalition is likely to be JPY positive, given political and policy stability and reduction of tail risks, fewer legislative hurdles and reduced pressure for a dovish BOJ and JGB stability,” he said. “We expect JGB yields to face upside pressure on a poor LDP performance, even if the ruling coalition retains a majority”.
EUR/USD fell 0.4% to 1.1599.
GBP/USD traded slightly lower near 1.3418; UK unemployment rate was 4.7% in May, more than 4.6% estimate in a Bloomberg survey.
AUD/USD declined 0.6% to 0.6490.
Australian unemployment unexpectedly climbing to a four-year high in June bolstered the case for the Reserve Bank to cut interest rates next month.
Source: Bloomberg
