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Dollar shrugs off dismal U.S. data to edge higher

Forex Jul 22, 2022 03:25PM ET
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2/2 © Reuters. FILE PHOTO: A woman holds Euro banknotes in this illustration taken May 30, 2022. REUTERS/Dado Ruvic/Illustration 2/2
 
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By Saqib Iqbal Ahmed

NEW YORK (Reuters) -The U.S. dollar shrugged off early weakness to edge higher against a basket of currencies on Friday, after data showed U.S. business activity shrank for the first time in nearly two years in July as a services slowdown outweighed manufacturing growth.

S&P Global (NYSE:SPGI) on Friday said its preliminary - or "flash" - U.S. Composite PMI Output Index had tumbled far more than expected to 47.5 this month from a final reading of 52.3 in June.

With a reading below 50 indicating business activity had contracted, it is a development likely to feed into a vocal debate over whether the U.S. economy is back in - or near - a recession after rebounding sharply from the downturn in early 2020 at the start of the COVID-19 pandemic.

The dollar found some support from safe-haven flows late on Friday, as investors' appetite for riskier assets diminished with U.S. indexes selling off on some weak earnings reports.

Against a basket of currencies, the dollar was 0.1% higher at 106.73. For the week the index was down 1.2%.

Friday's dismal U.S. data reflects a hit to sentiment, similar to that seen elsewhere around the globe, Bipan Rai, North American head of FX strategy at CIBC Capital Markets in Toronto, said.

"That's a reflection of tighter financial conditions and also the fact that inflationary pressures remain elevated," Rai said.

Rai, however, said he wasn't reading too much into the dollar's weakness on Friday.

"Even if the U.S. economy does slow down somewhat I don't think you can extrapolate some sort of medium term dollar weakness ... because we are seeing similar things elsewhere," he said.

Overall activity in the euro zone shrank due to an accelerating downturn in manufacturing and a near-stalling of service sector growth, with inflation pushing consumers to cut back spending, S&P Global's Composite Purchasing Managers' Index, a good gauge of economic health, showed.

The euro was 0.4% lower against the dollar at $1.0196.

The British pound slipped 0.2% against the dollar to $1.1979 after data showed Britain's businesses grew at their slowest pace in 17 months in July, fuelling concerns about a slowdown in a UK economy grappling with inflation at a four-decade high.

The risk-sensitive Australian dollar was 0.26% lower at $0.6911, while the kiwi fell 0.17% to $0.6242.

In cryptocurrencies, bitcoin was about flat on the day at $23,074.82, on pace to finish the week up about 10%, as traders bet the recent bout of weakness that had engulfed the market was over.

Dollar shrugs off dismal U.S. data to edge higher
 

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Comments (3)
Usman Usman
Usman Usman Jul 24, 2022 1:20AM ET
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hello
Jack Peterson
Jack Peterson Jul 22, 2022 7:52AM ET
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Let’s be realistic here, a .50 bump from the ECB is not enough! They have now lost whatever little credibility they had left.. inflation in the EU will continue its ascent and the Euro will suffer the consequences of it all.. look for more instability coming out of the EU… Starting with Draghi and Italy, then a possible EU breakup..
jason xx
jason xx Jul 22, 2022 7:52AM ET
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ECB doesn't care if you think they have credibility. Low interest rates did not cuase Inflation and raising rates won't cure it. You are just hurting the economy on the wrong place. Inflation will abate on its own when supply chains normalize and they know this
Stan Smith
Stan Smith Jul 21, 2022 10:24PM ET
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And....the ECB is also buying treasuries, Increasing the money supply and hiking rates...lol
 
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