Investing.com – The US dollar rose to new highs on Friday, with the Federal Reserve sounding more hawkish than its European counterparts, while sterling continued to retreat.
At 05:00 ET (09:00 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.1% higher at 105.365, not far from last week’s high of 105. 80.
Dollar supported by the relatively aggressive Fed
The US currency is in demand even as data points to a slowing economy.
The latest data on housing and labor markets was weak, and upcoming data, due later in the session, is expected to show a slowdown in activity.
However, Fed officials continue to call for caution and more data before agreeing to a rate cut, and the US central bank’s latest meeting cut its forecast of rate cuts this year to one from three previously.
In contrast, they started cutting rates earlier this month, have cut rates twice, and appear ready to start cutting rates in August.
“The surprise rate cut by the Swiss National Bank and the dovish policy of the Bank of England reinforced the idea that central banks in Europe are well ahead of the Federal Reserve in cutting rates, a positive development for the dollar,” ING analysts said. in a note.
Sterling is weakening as the August rate cut looms
fell 0.1% to 1.2652, with sterling close to a five-week low in the wake of the Bank of England’s latest policy meeting.
The BoE kept rates unchanged, but some policymakers said the decision not to cut was “balanced,” raising expectations that policymakers will agree to a cut at their next meeting in early August.
The pound was supported to some extent on Friday by data showing Britons jumped sharply last month after heavy rain kept shoppers away in April. Sales volumes rose 2.9% in May, compared to a revised decline of 1.8% in April.
fell 0.1% to 1.0692, after falling around 0.4% in the previous session, with weak economic data adding to political concerns in the region.
Eurozone business growth slowed sharply this month, with the bloc’s industry showing some signs of weakening as the downturn took a worse turn.
The preliminary , compiled by S&P Global, fell to 50.8 this month from 52.2 in May, clouding expectations in a Reuters poll for a rise to 52.5.
“With dovish signals from the European Central Bank’s main European counterparts (the BoE and the SNB) and investor nerves still quite nervous about fiscal and political developments in the EU, the euro is understandably under some pressure in the second half of this week,” ING said. .
The yen falls to an eight-week low
In Asia, it traded 0.1% lower to 158.81, with the pair falling slightly after earlier rising to a new eight-week high above 159.
The Japanese currency has remained in the background following the Bank of Japan’s decision last week to delay the tapering of bond stimulus until its July meeting.
The US Treasury Department on Thursday added Japan to a list of countries it is monitoring for possible labeling as a currency manipulator, after the BOJ intervened heavily to support the yen as it fell to a 34-year low.
Trading moved higher at 7.2611, with China’s yuan remaining under pressure on doubts over the strength of the country’s economic recovery.
