NEW YORK/LONDON :The U.S. dollar slid on Tuesday as a slew of mixed economic data, some delayed and therefore dated, reinforced expectations that the Federal Reserve will cut interest rates next month.
In U.S. late morning trading, the euro was up 0.5 per cent against the dollar at $1.1577, while sterling gained 0.6 per cent to $1.3184.
The dollar index, a measure of its performance against its major counterparts, fell 0.5 per cent to 99.746 following the release of September retail sales and producer price data, after it initially held on to its gains from last week when the index rose nearly 1 per cent.
“Producer prices were stable and retail sales showed a modest consumer slowdown, and this keeps a December rate cut on the table,” said Scott Helfstein, head of investment strategy, at Global X, in emailed comments.
Data showed U.S. retail sales rose 0.2 per cent in September, less than 0.4 per cent forecast by economists polled by Reuters and slowing from an unrevised 0.6 per cent gain in August.
Producer prices, on the other hand, increased 0.3 per cent, in line with expectation, after an unrevised 0.1 per cent drop in August; however, at the core level prices inched up 0.1 per cent, below the consensus forecast of 0.2 per cent.
In addition, the latest U.S. consumer confidence number declined to 88.7 in November, from an upwardly revised 95.5 in October, which further hurt dollar sentiment. Economists polled by Reuters had forecast the index edging down to 93.4 from the previously reported 94.6 in October.
“More worries about what lies ahead … hence, putting purchases for major items on hold,” wrote Jennifer Lee, senior economist at BMO in emailed comments.
The economic data followed dovish comments from policymakers in the past few days that helped cement rate cut expectations.
On Monday, Fed Governor Christopher Waller said the job market was weak enough to warrant another quarter-point rate cut in December, though action beyond that depended on a flood of data that was delayed by the federal government shutdown.
Waller’s comments followed similar remarks by New York Fed President John Williams on Friday.
Traders are now pricing in an 83 per cent chance of a cut next month, up from 50 per cent a week earlier, CME FedWatch showed. That huge swing underscores the challenge the market faces in pricing in near-term rates in the absence of economic data caused by the longest-ever U.S. government shutdown, which ended on November 14.
Francesco Pesole, currency analyst at ING, said some “year-end rebalancing flows before Thanksgiving may be getting in the way” of dollar weakening.
However, he added in a note to clients, “unless markets have a hawkish rethink, the dollar looks too strong relative to short-term rate differentials at these levels, and we see some material downside risks.”
In other currency pairs, the yen, which has been on the defensive since hitting 10-month lows last week, firmed on Tuesday to 156.055 per dollar, leaving the dollar down 0.5 per cent against the Japanese currency.
Investors have been waiting for any signs of official buying from Tokyo to support its currency, which has weakened by nearly 10 yen since the start of October after fiscal dove Sanae Takaichi took over as Japan’s prime minister.
Pesole said thinner liquidity around Thanksgiving could present good conditions for the Bank of Japan to intervene in USD/JPY, ideally after a market-driven correction in the pair.
Currency
bid
prices
at 25
November
03:58
p.m. GMT
Descript RIC Last U.S. Pct YTD High Low
ion Close Chang Pct Bid Bid
Previous e
Session
Dollar 99.835 100.2 -0.35 -7.98 per cent 100.26 99.
index per cent 696
Euro/Dol 1.1563 1.1521 0.37 per cent 11.69 per cent $1.158 $1.
lar 4 151
2
Dollar/Y 156.14 156.765 -0.42 -0.8 per cent 156.94 155
en per cent .91
Euro/Yen 180.55 180.76 -0.12 10.62 per cent 180.85 180
per cent .11
Dollar/S 0.8077 0.8082 -0.07 -11 per cent 0.8102 0.8
wiss per cent 059
Sterling 1.3176 1.3104 0.56 per cent 5.36 per cent $1.319 $1.
/Dollar 5 309
6
Dollar/C 1.4105 1.4107 0 per cent -1.9 per cent 1.4125 1.4
anadian 101
Aussie/D 0.6445 0.6464 -0.28 4.18 per cent $0.647 $0.
ollar per cent 643
6
Euro/Swi 0.9339 0.931 0.3 per cent -0.59 per cent 0.935 0.9
ss 313
Euro/Ste 0.8774 0.8789 -0.17 6.06 per cent 0.8798 0.8
rling per cent 775
NZ 0.5606 0.5611 -0.06 0.21 per cent $0.562 0.5
Dollar/D per cent 2 592
ollar
Dollar/N 10.2468 10.2196 0.27 per cent -9.84 per cent 10.274 10.
orway 2 217
8
Euro/Nor 11.8487 11.7894 0.5 per cent 0.68 per cent 11.860 11.
way 6 778
Dollar/S 9.5517 9.5441 0.09 per cent -13.29 9.5984 9.5
weden per cent 34
Euro/Swe 11.0464 10.9964 0.45 per cent -3.67 per cent 11.063 11.
den 001
