Q3 Earnings Alert! Plan early for this week’s stock reports with all key data in 1 placeSee list

Dollar continues to weaken; end of FOMC tightening in sight

Published 07/18/2023, 05:01 AM
© Reuters.
EUR/USD
-
GBP/USD
-
USD/JPY
-
AUD/USD
-
USD/CNY
-
DXY
-

Investing.com - The U.S. dollar slipped lower in early European hours Tuesday, trading near a more than one-year low as traders increasingly factor in a prompt end to the Federal Reserve’s tightening cycle. 

At 02:55 ET (06:55 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% lower at 99.415, just above the 99.362 level seen earlier Tuesday, its lowest since April 2022.

The U.S. central bank is widely expected to lift interest rates once more when it meets next week, but markets are focused on the end of the FOMC tightening cycle after U.S. consumer prices registered their smallest annual increase in more than two years last week.

This resulted in the dollar recording its worst weekly performance in eight months, falling more than 2% against its major rivals.

U.S. retail sales, industrial production due

Markets were now awaiting the release of U.S. retail sales and industrial production data, due later in the day, for more clues on the health of the world’s largest economy, and the potential path of interest rates.

The retail sales reading for June is expected to have improved from the prior month, while industrial production growth is also expected to accelerate in June, pointing to some resilience in the U.S. economy.

That said, it’s debatable whether these numbers will change market sentiment given last week’s tepid consumer and producer prices

“Last week’s U.S. disinflation shock altered the FX landscape, but a few days without key data releases will tell us whether that impulse can keep the dollar on the back foot as the FOMC risk event draws nearer,” said analysts at ING, in a note.

ECB, BOE still have more tightening to go

EUR/USD rose 0.2% to 1.1252, just below a fresh 17-month high, while GBP/USD rose 0.1% to 1.3089, not far from last week's top of 1.3144, also its highest since April 2022.

Both the European Central Bank and the Bank of England are widely expected to raise their respective benchmark interest rates again when they next meet, and are unlikely to stop their tightening cycle there.

The U.K. is to release June inflation data on Wednesday, and while the headline consumer price index is expected to ease to 8.2% year-over-year from 8.7% in May, that is still over four times higher than the BOE’s inflation target rate.

Similarly, inflation levels in Germany, the largest economy in the euro one, rose in June to 6.8% on the year, when harmonized with other European Union countries.

Elsewhere, USD/JPY fell 0.3% to 138.37 ahead of the Bank of Japan’s policy meeting next week, AUD/USD rose 0.1% to 0.6823, with the Australian dollar recovering some of the prior session’s steep losses.

USD/CNY traded flat at 7.1716, stabilizing after Monday’s hefty losses as traders look to the PBOC for more stimulus measures in the coming months.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.