Forex: US Dollar Lost Against Trading Peers

The US dollar fell against its major trading partners early Friday. The dollar bear was sustained after significant weight loss in November. Practically, the strength of the greenback was shadowed by its trading peers.

Data from the forex market indicated that USDEUR rose to 1.0896 from 1.0889 on Friday but was below a level of 1.0915 at the same time on Thursday morning. This week the euro lost 0.58% vs. the dollar.

Eurozone manufacturing PMI rose modestly in November but remained in contractionary territory, data released earlier Friday showed. The next European Central Bank policy meeting is scheduled for Dec. 14.

GBPUSD rose to 1.2649 from 1.2624 at the Thursday US close and 1.2643 at the same time Thursday morning. This week the British pound gained 0.85% against the dollar

UK manufacturing PMI advanced in November to a smaller negative reading while home prices rose modestly in the same month but were still down from a year ago, data released overnight showed.  The next Bank of England policy meeting is scheduled for Dec. 14.

USDJPY fell to 148.1659 from 148.2185 at the Thursday US close but was up from a 147.6906 level at the same time Thursday morning.  This week the US dollar lost 1.76% against the Japanese yen. Naira Devaluation Deepens Economic Crisis in Nigeria

Japanese manufacturing PMI declined further below the breakeven point in November while the unemployment rate declined in October, data released overnight showed. The next Bank of Japan policy meeting is scheduled for Dec. 18-19.

USDCAD fell to 1.3553 from 1.3560 at the Thursday US close and 1.3612 at the same time on Thursday morning.

The U.S. dollar, which has already weakened substantially in November, has a historic tendency to weaken into the year-end, which could be a positive signal for EUR/USD, says Derek Halpenny, head of research at MUFG, in a note.

“There is a seasonal bias that is quite compelling for EUR/USD in December,” he says. In November, the UK currency was up by more than 4% against the dollar and just touched a six-week high against the euro.

Two factors are powering this rise. The first is traders’ conviction that interest rates will be higher than in the Eurozone and the United States well into 2024 because British inflation is more stubborn.

The second driver of sterling’s strength is the 27 billion pounds of tax cuts announced by the government in its budget update last week. Prime Minister Rishi Sunak’s administration claimed that the measures would be paid for by a fall in public expenditure, but the math doesn’t add up.  If the government cranks up spending, the economy may grow more quickly, elevating rates and the currency.