Dollar Maintains Loss After US Data, All Peers Gain
A dollar gauge maintained its losses, losing against all peers in the Group of 10, after strong US economic growth and employment data made a small dent in the market’s conviction about how deeply the Federal Reserve will cut interest rates this year.
The Bloomberg Dollar Spot Index fell 0.3%, its third straight day of declines.
“Data indicates that the economy is perhaps not as weak,” said Aroop Chatterjee, a strategist at Wells Fargo. “Q2 GDP was upward revised and claims data shows that layoffs in the labor market have remained modest”.
“Markets are already pricing in” about 25bps cut in September, according to Bipan Rai, a managing director at BMO Global Asset Management. “However, a core PCE reading that surprises a bit to the upside should serve as a reminder that the Fed isn’t necessarily behind the curve”.
Economists expect Bureau of Economic Analysis data due Friday to show the core PCE price index — the Fed’s preferred inflation metric — to have increased 0.3% in July from the month before. From a year ago, they see it accelerating to 2.9% from 2.8%.
Federal Reserve Governor Lisa Cook filed a lawsuit challenging President Donald Trump’s attempt to fire her, the next step in a historic fight over independence of the US central bank.
Cook’s lawyers suggested that an unintentional “clerical error” may have been behind the mortgage dispute.
Investors now await a speech from Fed Governor Christopher Waller later Thursday, after New York Fed President John Williams had said the policy meeting next month would be “live”.
USD/JPY dropped 0.4% to 146.86; board member Junko Nakagawa said the central bank will continue to raise interest rates if the outlook for the economy and inflation is realized.
EUR/USD rose 0.4% to 1.1687; Francois Bayrou said he will negotiate directly with lawmakers next week and warned against new elections as he battles to stop France’s parliament from forcing him to resign.
“Unless there is a huge shift in the political landscape, we do not see French developments as a sustained driver of the euro for the remainder of the year,” George Saravelos, global head of FX research at Deutsche Bank, wrote. “The market is already pricing a lot of risk premium”.
“Despite a very weak government, budget execution this year has been remarkably positive and in line with what would be expected to meet the government’s budget deficit target,” he said.
READ: ECB Officials Saw Inflation Risks as ‘Broadly Balanced’ in July.
AUD/USD advanced 0.4% to 0.6533.
GBP/USD rose 0.1% at 1.3514.
Source: Bloomberg
