US Dollar Rises Against Peers Ahead of Economic Data
The United States (U.S.) dollar strengthened against its major trading partners in the forex market during early trading hours on Thursday ahead of economic data scheduled to be released.
Services conditions data for September from S&P Global are due to be released, followed by services data from the Institute for Supply Management at the same time as factory orders and shipments data for August.
Earlier Wednesday, outplacement firm Challenger, Gray & Christmas reported that layoffs intentions slowed in September but were well above year-ago levels.
The technology and health care sectors accounted for the most layoffs in the month, while cost-cutting and business conditions were the main reasons.
A quick summary of foreign exchange activity heading into Thursday showed that USDEUR fell to 1.1040 from 1.1050 at the Wednesday US close and 1.1068 at the same time Wednesday morning.
The Eurozone services purchasing managers’ index declined in September but remained above the breakeven point that indicates expansion, while producer prices rose more than expected in August, according to data released earlier Thursday. The next European Central Bank meeting is scheduled for Oct. 17.
GBPUSD fell to 1.3115 from 1.3271 at the Wednesday US close and 1.3280 at the same time Wednesday morning after Bank of England Governor Andrew Bailey said in a newspaper interview that the BoE could begin to cut interest rates more aggressively if inflation continues to slow. The next Bank of England meeting is scheduled for Nov. 7. Earlier Thursday, UK services PMI declined more than expected in September but still indicated expansion.
USDJPY rose to 146.9686 from 146.4682 at the Wednesday US close and 144.6539 at the same time Wednesday morning. Japan’s services PMI declined in September but remained above the breakeven point, according to data released overnight. The next Bank of Japan meeting is scheduled for Oct. 30-31.
USDCAD rose to 1.3538 from 1.3496 at the Wednesday US close and 1.3482 at the same time Wednesday morning. There are no Canadian data on Thursday’s schedule. The next Bank of Canada meeting is scheduled for Oct. 23.
The yen has been under severe pressure after the new Prime Minister Shigeru Ishiba said Japan is not ready for a new rate hike, ING analyst Francesco Pesole said in a note.
This prompted a complete unwinding of bets that Ishiba would have focused on fighting inflation, which had led to some JPY appreciation and a Nikkei sell-off earlier this week.
With Bank of Japan (BoJ) Governor Kazuo Ueda echoing Ishiba’s relatively dovish tone yesterday, the prospect of another hike by year-end is indeed starting to fade.
There is still a CPI print to look at before the October BoJ meeting, but it seems unlikely the bank will hike on 31 October given yesterday’s communication.
Analysts said it might be too early to completely rule out a December move, but it is now clear that would require a substantial inflation surprise.
The latest yen moves are probably part of a positioning adjustment after the recent build-up in JPY speculative longs, Pesole said in the note on Thursday.
Now that the positioning is more balanced and markets have priced out BoJ tightening this year, another large move higher in USD/JPY would probably need to follow a hawkish repricing in the USD curve. #US Dollar Rises Against Peers Ahead of Economic Data
