Home ForexArticles Dollar declines, but remains supported by economic resilience By Investing.com

Dollar declines, but remains supported by economic resilience By Investing.com

by SuperiorInvest

© Reuters.

Investing.com – The U.S. dollar fell during early trading in Europe on Thursday, but held near one-month highs after strong U.S. retail sales data cast further doubt on the early rate cuts by the Federal Reserve.

At 04:20 ET (0920 GMT), the dollar index, which tracks the dollar’s performance against a basket of six other currencies, was trading 0.1% lower at 103.107, after reaching 103.69 on Wednesday for first time since December 13th.

Resilient US activity boosts dollar

The dollar received a boost overnight after the United States strengthened than expected, supporting recent comments from several Federal Reserve officials that the central bank will keep rates high for longer.

There’s more US data to digest on Thursday, including weekly, December and January data.

U.S. economic activity has tended to surprise with its resilience, providing another reason for policymakers to act slowly.

UK data, released on Wednesday, showed the rate accelerated for the first time in 10 months in December. The next US release is scheduled for February 13.

“Investors will probably want to wait for this release before, for example, attempting to rebuild short dollar positions and long risk positions,” ING analysts said in a note.

Sterling supported by sticky inflation

In Europe, it rose 0.1% to 1.2685, continuing Wednesday’s rally after data showed inflation unexpectedly accelerated in December, reinforcing expectations that it will be slower than peers to cut. The types.

“Inflation data also helped GBP/USD hold support at 1.2600 yesterday and 1.26-1.28 looks a likely near-term range until the broader dollar trend resolves itself,” ING added.

was trading virtually unchanged at 1.0880, after bouncing from a one-month low on Wednesday after the ECB president flagged summer as the most likely time for the central bank’s first interest rate cut, later than market expectations of a spring cut.

Yen awaits key inflation data

In Asia, it traded 0.2% lower at 147.84, with the yen just above a more than one-month low ahead of key data due on Friday, which is expected to show a sustained decline in the inflation.

The reading is expected to provide little impetus to begin tightening its ultra-loose policy, which bodes poorly for the yen.

was trading virtually flat at 7.1964, after the yuan sank to its lowest level in almost two months.

The outlook for the yuan remained bleak, as the People’s Bank of China grappled with slow growth and limited room to continue supporting the currency.

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