Home ForexArticles Dollar Set to Gain Weekly; Sterling hit by weak retail sales By Investing.com

Dollar Set to Gain Weekly; Sterling hit by weak retail sales By Investing.com

by SuperiorInvest

© Reuters.

Investing.com – The U.S. dollar was lower in early European trading on Friday, but was on track for a second straight weekly gain on renewed doubts over the Federal Reserve’s first rate cuts. while weak retail sales weighed on the pound.

At 04:00 ET (0900 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was trading 0.1% lower at 103.212, but is up more than 1% so far this week.

Resilient US activity boosts dollar

Signs of resilience in the US economy have dampened expectations that the US central bank will begin its rate-cutting cycle as early as the first quarter of this year.

The United States came out stronger than expected earlier in the week, with data on Thursday showing that the number of Americans filing for unemployment benefits fell last week to the lowest level in nearly a year and a half.

“Markets remain attached to the prospect of a cut in March, which is now estimated to have a probability of around 50%-60%, but we really have a hard time imagining the Fed cutting within two months in the current economic context,” said ING analysts, in a note.

The next Federal Reserve meeting will be later this month and “the only key US data release before then is the fourth quarter numbers next week and, barring any major surprises, there is no bearish story.” convincing for next week.” ” ING added.

Weak UK retail sales hit sterling

In Europe, it fell 0.3% to 1.2670, with sterling taking a hit after the UK fell 3.2% in December, the biggest drop in sales since January 2021, raising the risk of the UK economy falling into recession at the end of last year.

This illustrates the difficult position it is in, as data released earlier this week showed it unexpectedly accelerated in December, implying the central bank will be slower to cut rates than its peers.

“This means that a further downward revision to the Bank of England’s rate expectations would require markets to be convinced that the December CPI surprise was just a blip,” ING added.

was trading virtually unchanged at 1.0874, with traders awaiting comments from the European Central Bank president in Davos later in the session.

Lagarde downplayed expectations for early rate cuts earlier in the week, and appears unlikely to backtrack today.

Yen set for steep weekly losses

In Asia, it traded slightly lower at 148.11, and the yen is expected to lose more than 2% this week.

Data on Friday showed Japanese consumer inflation fell to its lowest level since June 2022 in December, setting up the country to largely maintain its ultra-dovish policy when it meets next week.

traded slightly lower at 7.1944, with the yuan still weak after data earlier this week showed the world’s second-largest economy grew less than expected in the fourth quarter.

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