Investing.com – The U.S. dollar fell lower on Thursday, the euro posted small gains, while the Japanese yen climbed to multi-month highs ahead of next week’s Bank of Japan meeting.
At 05:25 ET (09:25 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, fell 0.2% to 103.950, extending its overnight decline.
The dollar is ahead of GDP data
The dollar retreated on Thursday, extending its overnight decline, amid rising confidence that interest rates will be cut in September.
Q2 data will be released later in the session and is expected to show year-on-year growth of 2.0%.
This would be above the 1.4% growth in the first quarter, but would remain significantly slower than the 4.2% growth in the second half of last year.
The release also shows that inflation slowed significantly last quarter, with the price index of GDP falling from 3.1% to 2.6%, ahead of Friday’s price index data, the Federal Reserve’s preferred inflation gauge.
The Fed meets next week and will broadly keep rates stable while signaling a rate cut in September.
German business morale is falling again
In Europe, it rose 0.1% to 1.0847, with the euro trading slightly higher despite an unexpected drop in German business morale in July, the third straight decline in Germany’s most prominent leading indicator.
The Ifo Institute said it fell to 87.0 in July from 88.6 in June.
“The German economy is stuck in the crisis,” Ifo President Clemens Fuest said.
Interest rates were maintained at 3.75% last week, but markets are pricing in just under two ECB rate cuts for the rest of this year.
traded 0.2% lower at 1.2885, moving back from the 1.30 level ahead of next week’s Bank of England policy-setting meeting.
UBS expects the central bank to cut rates in what is widely seen as a time when the central bank will begin what is likely to be a slow and steady cut.
Yen goes from strength to strength
In Asia, it fell 0.7% to 152.72, with the pair falling to its weakest level in two-and-a-half months as traders abandoned short yen bets ahead of the July BOJ meeting in the aftermath of suspected intervention in the foreign exchange market by the Japanese. government.
The ECB is expected to consider a 10 basis point increase and could unveil a plan to roughly halve bond purchases in the coming years.
“USD/JPY has now corrected 6% from its high. This has proven to be yet another successful intervention campaign for the Japanese authorities,” ING analysts said in a note.
“We think the success of the intervention has less to do with the size of the currency sales and more to do with the timing. As in September/October 2022, Japan’s currency intervention coincides with a mild revaluation of Fed policy. Very smart.”
fell 0.5% to 7.2281, but remained near an eight-month high amid continued concerns about a slowing economic recovery in the country. Surprise interest rate cuts by De Volksbank increased pressure on the currency and did little to lift sentiment about the Chinese economy.
