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Dollar moves lower, focus turns to central banks

Forex Jul 12, 2016 05:44AM ET
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Dollar loses ground as markets eye central bank meetings - The dollar moved lower against the other major currencies on Tuesday, as markets digested last week’s strong U.S. employment data and investors turned their attention to upcoming central bank meetings amid growing expectations for additional stimulus measures.

GBP/USD rallied 1.29% to 1.3163, pulling back from the post-Brexit 31-year low of 1.2794 set last Wednesday.

The pound strengthened as Theresa May emerged to succeed Prime Minister David Cameron, removing some of the political uncertainty that has hit the currency in the wake of the Brexit vote.

But the outlook for the pound remained clouded amid mounting expectations for a rate cut from the Bank of England at the conclusion of its policy meeting on Thursday.

The BoE could potentially cut interest rates to fresh record lows and step up quantitative easing measures to cushion the U.K. economy from the fallout from Brexit.

The BoE has said it expects the economy to suffer a material slowdown because of the uncertainty caused by the vote to leave the EU.

USD/JPY advanced 0.74% to 103.55, the highest since June 24, while USD/CHF slipped 0.19% to 0.9809.

The yen came under pressure after Japanese Prime Minister Shinzo Abe’s ruling coalition increased its majority in the upper house in parliamentary elections on Sunday.

The win for Abe’s coalition fed hopes for a fresh package of stimulus measures to spur economic growth.

The yen had risen to multi-year highs in recent weeks as Britain’s shock vote to exit the European Union sparked fears over the outlook for the global economy.

EUR/USD climbed 0.46% to 1.1109.

The Australian and New Zealand dollars were sharoly higher, with AUD/USD up 1.21% at 0.7625 and with NZD/USD advancing 1.09% to 0.7297.

The National Australia Bank said its business confidence index rose to 6 in June from a reading of 3 the previous month.

Elsewhere, USD/CAD dropped 0.56% to trade at 1.3044, the highest since June 28.

Commodity currencies were also boosted as oil prices regained some ground on Tuesday amid supply disruptions in Iraq.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.43% at 96.16.

Dollar moves lower, focus turns to central banks

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