Investing.com – The US dollar fell lower on Thursday as traders began factoring in aggressive easing by the Federal Reserve to counter a cooling economy.
At 04:10 ET (09:10 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.2% lower at 102.802, not far from Monday’s seven-month low.
Dollar Ahead of Unemployment Claims
Last week’s disappointing release has allayed concerns that the US economy was heading into a recession, which would likely force the US economy to cut interest rates faster than initially expected.
JPMorgan has raised the odds of a US recession by the end of this year to 35% from a 25% probability previously, citing easing pressure in the labor market.
This has led markets to estimate a 100% chance of a 50 basis point rate cut in September by the Federal Reserve, according to CME’s FedWatch tool.
There was even talk earlier this week about the possibility of an emergency rate cut before the September meeting, although the perceived likelihood of that has since diminished as markets stabilized somewhat.
More labor market data will be available on Thursday in the form of weekly figures, followed by the US July report next week, ahead of the central bank’s Economic Policy Symposium the following week.
Euro could be higher
In Europe, yields rose 0.2% to 1.0940, benefiting from dollar weakness and little economic data to impact trading.
They started cutting interest rates in June, and many expect policymakers to agree to a possible cut in September.
The ECB may continue to cut rates if confidence in the slowing inflation trend strengthens in the near future, Finnish ECB policymaker Olli Rehn said in a speech on Wednesday.
“Inflation continues to slow, but the path to the two percent target remains bumpy this year,” Rehn said.
rose 0.1% to 1.2700, staying close to the one-month low it hit on Tuesday.
The Bank of England figures will be published later in the session and could provide more clues as to why the central bank decided to cut interest rates last week.
The yen rises as the carry trade weakens
In Asia, yields fell 0.3% to 146.19 after rising 1.6% on Wednesday after Bank of Japan Deputy Governor Shinichi Uchida played down the chance of a near-term rate hike.
The pair fell sharply to a seven-month low at 141.67 at the start of the week after a surprise surge last week led investors to withdraw from carry trades, in which traders borrow the yen at low rates to invest in dollar-priced currencies. assets for higher returns, causing the yen to rise.
About three-quarters of the global carry trade has been removed, JPMorgan strategists said in a note on Wednesday.
In their recent report, JPMorgan noted that the risk-reward ratio for global carry is low due to the upcoming US elections and the potential repricing of lenders based on lower US interest rates.
fell 0.1% to 7.1683 after a series of stronger-than-expected midpoint fixes helped the currency hold off mediocre trading data released on Wednesday.
rose 0.7% to 0.6559, with the Australian dollar gaining after RBA Governor Bullock said the bank will not hesitate to raise rates because of more upside risks to inflation.
