The pound trod water on Tuesday as traders held their fire ahead of U.S. inflation data that could be key in dictating the near-term direction of the dollar against other currencies. British data earlier in the day showed UK workers’ wages grew slightly less quickly in the three months to September, but remained close to their record pace. The figures will likely do little to ease the Bank of England’s concerns about inflationary pressures and did nothing to change market-based forecasts for a UK rate cut in June 2024 at ...

USD: Watch for the key data correction event Most action in the FX market today should revolve around the release of the October inflation report in the US. Consensus expectations are for a month-on-month increase of 0.1% in the headline and 0.3% in the core, with yearly rates falling to 3.3% (headline) and steadying at 4.1% (core). Our US economics team’s view is broadly in line with consensus, although they highlight how the big drop in gasoline prices could allow headline MoM CPI to print a 0.0% or even a ...

The dollar climbed to its highest level in more than a year against the Japanese yen on Monday, near the key psychological level of 152, before falling sharply in a flurry of trading in $3.45 billion of options that come due this week. The dollar later traded little changed on expectations a soft reading of the U.S. consumer price index (CPI) on Tuesday will keep Treasury yields trending lower as the market perceives the Federal Reserve is done hiking interest rates. The dollar early in the session shot to 151.92 ...

Sterling edged higher on Monday after British Prime Minister Rishi Sunak reshuffled his cabinet, appointing former PM David Cameron as foreign minister and firing interior minister Suella Braverman. The reaction in the financial markets was modest and analysts said the direction for sterling in the near-term would be driven by economic data and the outlook for the U.S. dollar, rather than British politics. Sterling was last trading at $1.2248 , 0.2% higher on the day. Against the euro, the pound stood at 87.28 pence – also up 0.2%. Benchmark 10-year ...

USD: Bouncing around in ranges It has been another quiet start to the week in the world of FX. Investors have been left to mull over Moody’s decision on Friday to switch its Aaa rating on the US sovereign to negative, citing familiar concerns over the polarisation of politics and the erosion of governance. However, Federal Reserve policy rather than US sovereign creditworthiness remains the key driver of the dollar at present, and it is through this lens investors will assess the risk of a US government shutdown later this ...

The dollar climbed to its highest levels in over a year against the Japanese yen on Monday, supported by a scaling back of expectations for U.S. Federal Reserve interest rate cuts next year. Japanese authorities were unusually quiet as the yen, down almost 14% this year, weakened again although markets remained alert to potential intervention to shore up the Japanese currency. Markets also digested news late on Friday that Moody’s (NYSE:) has lowered its outlook for the U.S. credit rating to “negative,” while focus turned to Tuesday’s U.S. consumer price ...

The dollar held steady against the euro on Friday after Federal Reserve Chair Jerome Powell indicated that the central bank could hike rates again if inflation remains above its target. Meanwhile, the Japanese yen weakened as traders remained on watch for possible intervention to shore up the struggling currency. Powell and other Fed officials said on Thursday that they are still not sure that interest rates are high enough to finish the battle with inflation, with Powell saying that the Fed may get further help in taming price increases from ...

USD: Auction and Powell trigger dollar rebound The dollar chased the spike in US yields yesterday following a big tailing in the 30-year Treasury auction and hawkish comments by Fed Chair Jerome Powell. Speaking at the IMF conference, Powell warned against reading too much into the softer inflation figures and cautioned that the inflation battle remains long, with another hike still possible. If we look at the Fed Funds future curve, it is clear that markets remain highly doubtful another hike will be delivered at all, but Powell’s remarks probably ...

The dollar was on track for its best week against the yen in three months on Friday, after Federal Reserve Chair Jerome Powell and a chorus of other officials stressed that the central bank may have to hike rates again. A slew of Fed policymakers including Powell said on Thursday they are still not sure that interest rates are high enough to finish the battle with inflation. Investors saw the comments as hawkish, pushing bond yields and the dollar higher. The dollar stood near a one-year high at 151.43 yen ...

The dollar edged lower on Thursday before a speech by Federal Reserve Chairman Jerome Powell, with markets focused on whether he will push back against last week’s fall in Treasury yields and the dollar on expectations that the U.S. central bank is done hiking interest rates. Traders also remained on alert for potential intervention to shore up the struggling Japanese yen, which is holding above 150 against the U.S. currency and just above a one-year low reached last week. U.S. government bond yields and the greenback tumbled last week after ...

USD: Soft US rates undermine the dollar Looking across asset markets the mood appears to be one of investors buying into the US slowdown. US rates remain at recent lows and there has been no concerted pushback from the Federal Reserve, yet, on this easing of financial conditions. Instead, we seem to be getting a core message from the Fed that the US labour market is moving better into balance – which can take some steam out of wage growth and broader inflation. Far from reversing last week’s big drop, ...

The dollar’s recent weakness will linger for the rest of the year, according to a majority of FX strategists in a Reuters poll, who also said economic data will be the primary influencer of major currencies for the rest of 2023. A stronger-than-expected U.S. economy and rising Treasury yields as the Federal Reserve hiked interest rates to curb high inflation provided the dollar with an unassailable edge over its peers. But renewed expectations the Fed is done with its rate hikes have put the dollar at a disadvantage, with the ...

The dollar gained for a third day on Wednesday as it continued to recover from a sharp selloff last week on rising confidence that the Federal Reserve has ended its interest rate hiking cycle. Traders also remained on alert for potential intervention in the Japanese yen as it holds above the 150 level against the dollar. Many economists and analysts expect the U.S. economy to slow in the fourth quarter, which makes further rate hikes less likely and will dent the appeal of the greenback, which has benefited from the ...

Emerging market currencies will take well into next year to start making noticeable gains against a retreating U.S. dollar, despite a growing view the interest rate cycle has peaked, a Reuters poll of FX strategists showed. After getting battered for most of 2023, emerging market (EM) currencies have made modest gains against the dollar after the Federal Reserve held interest rates steady last week and data suggested the U.S. economy might finally be slowing. That dollar weakening trend was likely to hold in the near-term as a majority of analysts ...

USD: Fed hawks step in The dollar rebound has started to gain some momentum. What has likely offered a hand to the greenback was the generally hawkish comments by Fed members yesterday, with both a hawk – Neel Kashkari – and a dove – Austan Goolsbee – emphasising the inflation battle and leaving all options open for the December meeting. Two more hawkish members, Michelle Bowman and Lorie Logan, echoed the message. The 2-year USD OIS has now recovered some ground, trading around 4.75% this morning, although 10-year Treasuries continued ...