Business
Dollar Erases Early Gains on Weak US Economic News
The dollar index (DXY00) fell from a 7-week high on Friday and finished down by -0.03%. The dollar gave its advance on Friday on weaker-than-expected US economic news that showed Aug manufacturing production and Aug leading indicators unexpectedly declined. Also, Friday’s -1% fall in WTI crude oil eased inflation expectations and could persuade the Fed to loosen monetary policy, a bearish factor for the dollar.
The dollar initially moved higher on Friday on weakness in the yen, which fell to a 2-week low today. Higher T-note yields on Friday also supported the dollar. The dollar also has carryover support from Wednesday when the FOMC raised interest rates by 25 bp and signaled another rate hike by the end of the year. The dollar fell from its best level after US
More News from Barchart
US Aug manufacturing production unexpectedly fell -0.3% m/m, weaker than expectations of +0.3% m/m and the largest decline in 10 months.
US Aug leading indicators unexpectedly fell -0,1%, weaker than expectations of a +0.1% increase and the first decline in 5 months.
Markets are pricing in a 55% chance of a +25 bp Fed rate hike at the next FOMC meeting on October 27-28.
EUR/USD (^EURUSD) recovered from a 7-week low on Friday and finished up by +0.10%. Short covering emerged in the euro on Friday after the dollar index fell from a 7-week high and turned lower. The euro also garnered support after German Aug producer prices rose more than expected, a hawkish factor for ECB policy. Also, ECB President Lagarde’s comments today supported the euro when she said economic growth in the Eurozone is a bit more promising than we thought.
The ECB Aug 1-year CPI expectations rose to +3.0% from +2.9% in July, weaker than expectations of +3.1%. The Aug 3-year CPI expectations rose to +2.9% from +2.7% in July, stronger than expectations of +2.8%.
German Aug PPI rose +1.1% m/m and +4.6% y/y, stronger than expectations of +0.6% m/m and +3.9% y/y, with the +4.6% y/y increase the largest in 3.25 years.
ECB President Christine Lagarde said economic growth in the Eurozone is a bit more promising than we thought, and we’re not seeing second-round effects on inflation yet.
The markets are discounting a 62% chance of a +25 bp ECB rate hike at the ECB’s next policy meeting on October 29.
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