By Chuck Mikolajczak
NEW YORK (Reuters) – The dollar fell for a second straight week after a recent gain lost steam, but it was still on track for a fourth straight week of gains after this week’s data lowered interest rate expectations for the kept the Federal Reserve under control.
The Commerce Department said orders for non-defense capital goods excluding aircraft, a closely watched measure of corporate spending plans, rose 0.5% last month after an unrevised increase of 0.3 % in August and above the 0.1% increase estimated by economists polled by Reuters.
A separate report from the University of Michigan shows that consumer confidence rose from 70.1 to 70.5 in October, higher than the estimate of 69.0, while the one-year inflation outlook fell from 2.9% to 2.7%, but in line with the September end result.
The dollar was poised for a fourth straight week of gains as a series of positive economic data dampened expectations about the size and speed of Fed rate cuts, also pushing up U.S. Treasury yields. Investors are now focusing on a key government payroll report next week.
“We had a massive recalibration of economic expectations for the US and that process appears to have largely run its course. The Fed’s policy path looks much more reasonable and interest rate differentials between the US and other major economies are stabilizing here,” he said. Karl Schamotta. , chief market strategist at Corpay in Toronto.
“The , which measures the dollar against a basket of currencies, lost 0.02% to 104.03, while the euro rose 0.02% to $1.083.
In Europe, a Friday survey of German business confidence showed that confidence improved more than expected this month, breaking four straight months of declines, offering hope of some reprieve by year’s end in the economy’s battle with the industrial problems and weak global demand.
European Central Bank (ECB) President Christine Lagarde said eurozone inflation is “well on track” to reach the European Central Bank’s 2% target next year, echoing the latest guidance from the European Central Bank. bank repeated.
The dollar has also benefited from a rise in market expectations for a victory next month by Republican candidate and former US President Donald Trump, which would likely lead to inflationary policies such as tariffs.
Schamotta said that while these policies should support the dollar, they may already be priced in and their negative effects, such as inflation, could dampen consumer confidence and weaken the dollar more than markets expected two weeks ago.
According to CME’s FedWatch Tool, markets estimate a 95.6% chance of a 25 basis point cut at the Fed’s November meeting, while the chance of the US central bank holding rates steady is 4.4%. The market had fully priced in a cut of at least 25 basis points a month ago, with a 57.4% chance of a 50 basis point cut.
Against the Japanese yen, the dollar strengthened 0.13% to 152.02. Sterling strengthened 0.13% to $1.2989.
Japanese voters were expected to go to the polls on Sunday for a general election. Opinion polls show the ruling Liberal Democratic Party (LDP) could lose its dominance of more than a decade, potentially complicating monetary policy plans for the Bank of Japan. (BOJ).
The BOJ will meet next week and is expected to keep ultra-low interest rates in place next week, which will likely signal less policy easing due to waning fears of a US recession – and the need to keep speculators from overvaluing the yen pressing down.
Another potential complication for the BOJ was data showing the Japanese capital’s core inflation fell below the central bank’s 2% target in October for the first time in five months.
