Oct 11 2024: The U.S. dollar edged lower on Friday but remained on track for a weekly gain as traders re-evaluated potential Federal Reserve rate cuts following strong payroll data.
As of 04:30 ET (08:30 GMT), the Dollar Index, which measures the greenback against a basket of six major currencies, was down 0.2% at 102.594. Despite this dip, the index is set for a 0.4% weekly rise, building on the previous week’s more than 2% surge.
Focus Shifts to U.S. Producer Price Data The dollar has seen robust demand since last week’s stronger-than-expected payrolls report, leading traders to largely dismiss the likelihood of another large rate cut by the Federal Reserve at its upcoming meeting.
However, Thursday’s rise in initial jobless claims raised some concerns about the labor market, while hotter-than-expected consumer inflation data kept inflation risks in focus.
Next up, the U.S. producer price index (PPI) data is set to be released later today, with expectations for modest gains. Nonetheless, uncertainty remains following September’s slightly stronger-than-expected consumer inflation reading.
The odds for a quarter-point rate cut by the Fed on November 7 have risen to 83.3% from 80.3% the day prior, with the remainder of bets on rates staying steady, according to the CME Group’s FedWatch Tool.
British Economy Sees Growth In Europe, GBP/USD rose by 0.1% to 1.3068, following data showing the UK economy returned to growth in August after two months of stagnation.
UK gross domestic product (GDP) grew by 0.2% in August, in line with expectations, and was up 1.0% compared to a year ago. The data suggests that the British economy is on track for its third consecutive quarter of growth.
The Office for National Statistics (ONS) noted that September’s GDP would need to contract by 0.3% to 0.6% for the quarter to post no growth, assuming no revisions to earlier figures.
EUR/USD inched 0.1% higher to 1.0944 after data confirmed that German consumer inflation eased to 1.8% in September, falling below the European Central Bank’s (ECB) target.
Given weaker inflation and stagnant growth in Germany, the ECB is expected to ease policy further in its upcoming meeting, following two rate cuts earlier this year. Analysts at ING suggested that while a hold on rates shouldn’t be entirely ruled out, it would take significant boldness from the ECB to go against market expectations for a 25 basis point reduction.
Yuan Gains Ahead of Chinese Stimulus Briefing USD/JPY dipped 0.1% to 148.75 after approaching the 150 yen mark earlier in the week, a level not seen since August.
USD/CNY fell by 0.2% to 7.0672 as the yuan strengthened ahead of an anticipated finance ministry briefing, where the Chinese government is expected to unveil fiscal stimulus plans. Analysts predict Beijing will announce at least 2 trillion yuan ($283 billion) in stimulus, with a significant portion aimed at boosting private consumption.
