The dollar seems to be taking a breather
Friday’s strong payrolls report has caused traders to reassess the Fed’s rate-cutting path, with the likelihood of another 50 basis point cut during November mostly ruled out in favor of a slightly more traditional 25 basis point reduction.
The benchmark 10-year Treasury yield, which shows the least hawkish expectations, held above 4% on Tuesday, while the two-year yield was at its highest level in more than a month.
This has helped boost the dollar, as has the escalation of tensions in the Middle East, which has hit risk sentiment.
Later this week, several members of the Federal Reserve will have their say, as will September’s inflation report and the U.S. central bank’s meeting the month before.
“We have seen a fairly limited impact on the FX market from US 10-year yields hitting the 4% mark, which appears to be the tail end of the payrolls-induced move that has already triggered some considerable repositioning in dollar crosses,” ING analysts said in a note.
“There is a possibility that the FX market will cease to be guided by rates now that the Fed’s new 25 basis point per meeting rate path has become the market benchmark. We suspect that this week’s inflation data this week will not cause major directional changes in the dollar, which may instead respond more to the turmoil in the Middle East, and the resulting moves in oil prices,“ the analysts added.” added the analysts.
The euro benefits from German industrial production.
In Europe, the EUR/USD rose 0.2% to 1.0995. The euro benefited from the release of better-than-expected industrial production data in Germany, as the August figure increased by more than 2.9% more than estimated compared to last month.
Moreover, the less volatile quarter-on-quarter comparison revealed that output was 1.3% lower in the June to August period than in the previous three months.
The European Central Bank meets next week and is expected to ease policy once again, having already cut rates twice this year, as inflation pressures have eased.
GBP/USD was up 0.2% at 1.3104, moving away from Monday’s three-week low of 1.3059.
Data released Tuesday revealed that UK retail sales rose at their fastest pace in six months during September.
Total sales rose 2% year-on-year, according to the British Retail Consortium, helped by a 3.1% rebound in food retailers, while non-food transactions fell 0.3%.
Yuan retreats after the vacations
USD/JPY was down nearly 0.4% to 147.55, able to recover some of the strong gains posted the previous week.
Data related to wage growth and household spending likewise helped Japan’s currency. USD/CNY rose 0.5% to 7.0506 as trading resumed after a week.
Sentiment towards China was boosted by a series of stimulus measures from Beijing, including lower interest rates, although these put further pressure on the yuan, especially as US interest rates are now expected to continue to rise.Dollar falls from highs; euro gains on strong German data
The dollar seems to be taking a breather
Friday’s strong payrolls report has caused traders to reassess the Fed’s rate-cutting path, with the likelihood of another 50 basis point cut during November mostly ruled out in favor of a slightly more traditional 25 basis point reduction.
The benchmark 10-year Treasury yield, which shows the least hawkish expectations, held above 4% on Tuesday, while the two-year yield was at its highest level in more than a month.
This has helped boost the dollar, as has the escalation of tensions in the Middle East, which has hit risk sentiment.
Later this week, several members of the Federal Reserve will have their say, as will September’s inflation report and the U.S. central bank’s meeting the month before.
“We have seen a fairly limited impact on the FX market from US 10-year yields hitting the 4% mark, which appears to be the tail end of the payrolls-induced move that has already triggered some considerable repositioning in dollar crosses,” ING analysts said in a note.
“There is a possibility that the FX market will cease to be guided by rates now that the Fed’s new 25 basis point per meeting rate path has become the market benchmark. We suspect that this week’s inflation data this week will not cause major directional changes in the dollar, which may instead respond more to the turmoil in the Middle East, and the resulting moves in oil prices,“ the analysts added.” added the analysts.
The euro benefits from German industrial production.
In Europe, the EUR/USD rose 0.2% to 1.0995. The euro benefited from the release of better-than-expected industrial production data in Germany, as the August figure increased by more than 2.9% more than estimated compared to last month.
Moreover, the less volatile quarter-on-quarter comparison revealed that output was 1.3% lower in the June to August period than in the previous three months.
The European Central Bank meets next week and is expected to ease policy once again, having already cut rates twice this year, as inflation pressures have eased.
GBP/USD was up 0.2% at 1.3104, moving away from Monday’s three-week low of 1.3059.
Data released Tuesday revealed that UK retail sales rose at their fastest pace in six months during September.
Total sales rose 2% year-on-year, according to the British Retail Consortium, helped by a 3.1% rebound in food retailers, while non-food transactions fell 0.3%.
Yuan retreats after the vacations
USD/JPY was down nearly 0.4% to 147.55, able to recover some of the strong gains posted the previous week.
Data related to wage growth and household spending likewise helped Japan’s currency. USD/CNY rose 0.5% to 7.0506 as trading resumed after a week.
Sentiment towards China was boosted by a series of stimulus measures from Beijing, including lower interest rates, although these put further pressure on the yuan, especially as US interest rates are now expected to continue to rise.Publication date:
2024-10-08 16:08:04 (GMT)
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