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Investing.com – The US dollar fell in early European trade on Friday, pulling back from a two-month high, but still on track for a fifth consecutive week of gains as a resilient US economy signaled higher interest rates for longer.
The US dollar index is now recording 103.287, down by 0.18%, but that does not change the fact that it is trading at its highest level in two months. The euro-dollar pair is also trading at 1.0875 at the moment.
The dollar is heading for another weekly gain
The dollar saw some profit-taking early on Friday, with risk sentiment boosted after the People’s Bank of China said it would continue to offer more liquidity in a bid to support the country’s faltering economic recovery.
However, over the course of the week, the dollar index is still poised to gain 0.5%, amid growing expectations that the US Federal Reserve will maintain its hawkish stance for longer than previously thought.
Data released on Thursday showed that the weekly in the US fell more than expected, indicating continued resilience in the labor market, providing more room to continue raising interest rates.
This followed the release of the Fed’s July meeting which showed most policymakers support higher rates to curb flat inflation.
“The minutes of the July FOMP meeting … showed that the majority of members continued to see upward risks regarding the inflation outlook while leaving the door open for further tightening,” ING analysts said in a note.
Sterling fell after weak retail sales data
The currency pair fell 0.3% to 1.2712 after the British fell sharply more than expected in July, falling 1.2% from June, a year-on-year decline.
Shoppers are clearly feeling the blow from a rally and 14 consecutive increases in the market, but markets felt the impact of bad conditions during the month as well.
ONS Deputy Director for Economic Surveys and Indicators Heather Profile said: “It was a particularly bad month for supermarkets, as the summer drift combined with the increasing cost of living slowed sales of both apparel and food. Store sales and household goods also fell. Significantly”.
The date of the release of inflation data in the eurozone
The currency pair fell to 1.0868, not far from Thursday’s six-week low of 1.0856, with the possibility of pausing the more than a year-long interest rate hike in September after hints from Chair Christine Lagarde.
However, the latest release of the index is due later in the session and is expected to show an annual figure of 5.3%, down slightly from 5.5% in the previous month, indicating expectations for another increase by the end of the year.
Strengthening the yuan by strong reform
Elsewhere, the currency pair rose 0.1% to 7.2864, with the yuan supported by dollar sales and strong midpoint reforms, but the outlook for the yuan remains largely bleak with the possibility of lower interest rates in light of the faltering Chinese economy, and the real estate sector in particular.
The currency pair fell 0.4% to 145.30, after strong readings for July helped the yen, adding pressure on the Bank of Japan to eventually start tightening monetary policy.
2023-08-18 16:36:00
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