Investing.com – The U.S. dollar was largely steady on Friday, on track for a fourth consecutive week of gains, supported by declining expectations of aggressive Fed rate cuts and increased political uncertainty.
At 04:25 ET (08:25 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading marginally lower at 103.880, still on track for a weekly gain of about 0.6%.
The dollar remains ahead of payrolls
The dollar was steady on Friday after falling slightly the previous session due to lower US Treasury yields.
Overall, however, interest rates were in demand for much of the month as reasonably healthy economic data caused the market to scale back expectations of steeper interest rate cuts from the Federal Reserve in the near future.
This relative calm could disappear next week, with a very consequential US report next Friday.
However, ahead of this publication, the focus may well be on the upcoming US presidential election, as market bets on a possible return of Donald Trump increase.
“The polls clearly tell us the election is too close, but markets and betting are increasingly tilted in Trump’s favor,” ING analysts said in a note.
“This may be due to the experience of the past two elections, in which Trump was underestimated by polls, but also to the greater demand for hedging for a Trump presidency, which is seen as a macro/market event with more impact due to protectionism , tax cuts, strict migration policies and risks to the Fed’s independence.”
ECB considering major cuts?
In Europe, the price rose marginally to 1.0833, on track for a weekly loss of more than 0.3%.
Data rose slightly in October, data showed on Friday, but sentiment remains weak after eurozone business activity stalled again this month.
The ECB has already cut rates three times this year, each time by 25 basis points, but expectations are growing that the central bank will consider a bigger cut at its next meeting.
“Bundesbank President Joachim Nagel was asked twice during his stay in Washington whether he would consider a 50 basis point cut in December, and both times he refrained from explicitly pushing back,” ING said. “Nagel is one of the most aggressive members of the Board of Directors and just a month ago would probably have answered with a clearer ‘no’.”
was trading largely unchanged at 1.2972, heading for a weekly loss of around 0.5%, but has also slipped from the two-month low we saw on Wednesday.
The governor of the Bank of England will speak in Washington on Saturday, and traders will be on the lookout for comments on likely future policy after he warned earlier this month that the central bank “could become a bit more activist on rate cuts” if further good news is about inflation. .
Yen is looking forward to the elections this weekend
rose 0.1% to 152.02 and held steady near a three-month high, with the pair heading for a 1.6% gain this week – its fourth straight week of gains.
Sentiment towards Japanese markets was largely tense ahead of Sunday’s general election, where local polls showed an alliance led by the ruling Liberal Democratic Party could struggle to reach a majority.
This could mean Prime Minister Shigeru Ishiba faces an uphill battle to implement more economic reforms.
rose to 7.1209, within a tight range with a meeting of China’s National People’s Congress initially scheduled for late October but now appearing to have been postponed until November.
