FOREX-Dollar: The dollar held steady while sterling crosses lost ground on Thursday in holiday-thinned trade ahead of the year’s final major data release, U.S. inflation figures on Friday.
Sterling GBP=D3 fell sharply against the dollar on Wednesday after British inflation fell short of expectations to 3.9% year on year in October, a two-year low.
The currency fell 0.7% to $1.2638 as traders priced in Bank of England rate cuts as early as May. On Thursday, it fell to a one-week low of $1.2618.
The pound fell to its lowest level in more than three weeks against the euro, at 86.78 pence. GBP/
Analysts predict a similar easing for Friday’s core personal consumption expenditure (PCE) data in the United States, with annual inflation expected to fall to 3.3%, its lowest level since 2021.
However, given that the dollar has been on the defensive for weeks and that 150 basis points of Federal Reserve cuts are already priced in for 2024, caution has kept any further dollar selling at bay for the time being. – FOREX-Dollar
Some position adjustments and risk reduction ahead of (this) event… is only reasonable, said OCBC currency strategist Christopher Wong in Singapore.
As we approach the festive season, liquidity is diminishing, and the thin market conditions could magnify price fluctuations in response to unexpected data surprises.
Although stock futures steadied, heavy selling during Wall Street’s last hour of trading also caused a wave of risk aversion to sweep through the markets.
Along with Japan raising its forecast for fiscal year growth to 1.6%, the mood supported the safe-haven yen, JPY=EBS.
The yen reached a high of 142.81 per dollar earlier today, but it gained roughly 0.2% to close at 143.24.
The Bank of Japan has persistently maintained negative short-term rates, despite 300 basis points of increases in US interest rates, which has resulted in the currency losing more than 8% of its value this year.
Goldman Sachs analysts believe markets should take note of the Bank of Japan’s decision to maintain its easing bias at its most recent meeting.
Market pricing for action early next year remains overly aggressive, particularly given how widespread the disinflation narrative has become, Goldman Sachs analysts wrote in a note.
This is just one of the reasons why we think there is still limited scope for substantial yen appreciation.
The euro EUR=EBS remained steady at $1.0941.
The Australian and New Zealand dollars were trading just below their five-month highs set on Wednesday. The Australian dollar AUD=D3 was last trading at $0.6744, having reached a high of $0.6779 the day before. The Kiwi NZD=D3 was trading at $0.6251. – FOREX-Dollar
The dollar index =USD, which has fallen 1% this year, remained stable at 102.40. On Wednesday, ten-year Treasury yields US10YT=RR fell to a seven-month low of 3.847%.
The Chinese yuan CNY=CFXS fell as the cost of offshore yuan funding fell and China’s blue-chip stock index fell to near five-year lows. It was last trading at 7.1469 per dollar. CNY/
Bitcoin BTC=BTSP briefly surpassed $44,000 on Wednesday and was steady at $43,717 on Thursday, just below the 20-month high of $44,729.
