Investing.com – The US dollar rose higher in early European trading on Thursday, recovering from the previous session’s steep losses after the Federal Reserve opened the door to a September rate cut, while the British pound fell ahead of the latest policy moves of the Bank of England meeting.
At 05:45 ET (09:45 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.3% higher at 104.154, after falling 0.4% on Wednesday.
The index fell 1.7% in July, the weakest monthly performance this year.
The dollar cuts Fed-related losses
Interest rates remained at their current levels at the end of the two-day policy-setting meeting on Wednesday, as widely expected, but also signaled that an easing of monetary policy was approaching.
The Fed chairman noted that while inflation is “somewhat” above target, upside risks have declined and downside risks to the labor market are increasing.
Powell’s comments “suggest that the bar is not set very high” for a cut in September, economists at Goldman Sachs said in a note.
“We continue to expect July inflation data to be favorable (we forecast 21 basis points for core CPI and 19 basis points for core PCE) and think even acceptable news would likely lead to a rate cut in September,” Goldman added. economists add to it.
The July report will be released on August 14.
There is a lot of economic data due on Thursday, including weekly data for June and data for July, but the focus now is on Friday’s much-watched monthly report.
This is expected to show that the US economy created 177,000 jobs in July, up from 206,000 in the previous month. The , which has been moving higher over the past three months, is expected to remain stable at 4.1%.
Sterling drops ahead of the BOE meeting
In Europe, it fell 0.7% to 1.2767, with the pound falling sharply ahead of the meeting, expected later in the session.
There is a lot of uncertainty surrounding this decision as key central bank officials have not spoken publicly for more than two months, given the proximity to the UK general election in July.
Britain returned to the BOE’s 2% target in May and stayed there in June, suggesting a cut later Thursday is a distinct possibility.
In June, the MPC voted 7-2 to leave rates unchanged, but meeting minutes showed that several of those who voted for a rate cut were close to voting for a cut.
fell 0.4% to 1.0783 after data showed eurozone industrial activity remained in contraction in July, suggesting the European Central Bank will have to cut interest rates again this year to to boost the slowing economy.
The final HCOB, compiled by S&P Global, stood at 45.8 in July in June, just above a preliminary estimate of 45.6.
Growth has been below the 50 limit for more than two years, which makes the difference between growth and shrinkage.
The yen rose in July
In Asia, the yen fell 0.2% to 149.66, with the yen rising in the wake of the Bank of Japan raising interest rates to levels not seen in 15 years and the Fed interest rate cuts on the table now that US inflation is cooling.
The yen rose 7% in July, its strongest monthly performance since November 2022, after settling near a 38-year low at the start of the month, largely due to bouts of interventions by Japanese authorities totaling $36 .8 billion.
rose 0.3% to 7.2432 as data showed an unexpected contraction in China’s manufacturing sector following the release of weak government PMI data earlier this week.
The figures fueled concerns about a broader slowdown in China’s biggest economic engines, further souring sentiment toward the country. They also led to increased calls for stimulus measures from Beijing.
