US Dollar Climbs as Sterling Pulls Back in FX Market
In the forex market, the US dollar showed strength against trading partners as hope of us Fed rate cut improved. The US dollar rose against its major trading partners early Wednesday ahead of a relatively quiet day that includes data on weekly crude oil stocks.
Sterling hands back some of its earlier gains against the dollar as the U.S. currency recovers but strengthens further versus the euro on expectations the Bank of England will cut interest rates cautiously.
The DXY dollar index has modestly rebounded since the start of the week, largely driven by the weaker EUR/USD, and one can probably argue another small leg higher in the greenback against pro-cyclical peers is warranted now.
While US Fed explicit rate cut guidance has some significance, investors had fully priced in easing well before Jackson Hole and the negative USD reaction to the speech looked a bit overdone from the onset, Francesco Pesole, FX analyst at ING said in a note..
Earlier Wednesday, the Mortgage Bankers Association said mortgage applications in the week ended Aug. 23 were lifted by a fourth straight weekly decline in mortgage rates to their lowest point since April 2023.
A quick summary of foreign exchange activity heading into Wednesday showed that USDEUR fell to 1.1124 from 1.1184 at the Tuesday US close and 1.1167 at the same time Tuesday morning.
Eurozone money supply rose less than expected in July, while loan growth was in line with forecasts, data released earlier Wednesday showed. The next European Central Bank meeting is scheduled for Sept. 12.
GBPUSD fell to 1.3220 from 1.3261 at Tuesday US close but was up from a level of 1.3216 at the same time Tuesday morning. There are no UK data on Wednesday’s schedule, but Bank of England policy board member Catherine Mann is due to speak at 8:15 am ET. The next BoE meeting is scheduled for Sept. 19.
USDJPY rose to 144.4621 from 143.9786 at the Tuesday US close but below a level of 144.7885 at the same time Tuesday morning. The Japanese leading index declined less than expected in June, but the coincident index fell more than forecast, both following gains in May, according to data released overnight. The next Bank of Japan meeting is scheduled for Sept. 19-20.
USDCAD rose to 1.3458 from 1.3447 at the Tuesday US close but was below a level of 1.3465 at the same time Tuesday morning. There are no Canadian data on Wednesday’s schedule. The next Bank of Canada meeting is scheduled for Sept. 4. #US Dollar Climbs as Sterling Pulls Back in FX Market
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