The U.S. dollar steadies after Fed losses, rebounding in early European trading on Thursday. This recovery comes following significant losses from the previous session due to the Federal Reserve’s signal of a potential rate cut in September. The Dollar Index, which measures the greenback against a basket of six major currencies, saw a 0.3% increase to 104.154 after a 0.4% drop on Wednesday.
The index had fallen by 1.7% in July, its weakest monthly performance this year. The Federal Reserve maintained interest rates but hinted at easing monetary policy. Fed Chair Jerome Powell noted that while inflation is slightly above the target, risks to the labor market are growing.
Goldman Sachs economists suggest that the bar for a September rate cut is low. They anticipate that favorable July inflation data will likely ensure a rate cut. The inflation report, due on August 14, will be pivotal.
Alongside inflation data, other key reports include weekly jobless claims, June construction spending, and ISM Manufacturing data for July. The focus is on Friday’s jobs report, expected to show 177,000 jobs added in July, down from 206,000 in June. The unemployment rate is predicted to hold steady at 4.1%.
In Europe, the British pound has weakened, falling 0.7% to 1.2767 against the U.S. dollar. This decline comes ahead of the Bank of England’s policy meeting later today. There is uncertainty as key BOE officials have remained silent due to the recent U.K. general election.
U.K. consumer price inflation met the BOE's 2% target in May and June, raising the chance of a rate cut. The BOE’s last meeting saw a 7-2 vote to hold rates steady, but minutes revealed some members were close to voting for a cut.
The euro also declined, with EUR/USD falling 0.4% to 1.0783. Eurozone manufacturing activity remains in contraction, suggesting the European Central Bank may need to cut rates further this year. The final eurozone manufacturing PMI held at 45.8 in July, just above the preliminary estimate. This index has been below the 50 mark for over two years.
In summary, the dollar steadies after Fed losses, showing signs of recovery despite recent volatility. Meanwhile, the British pound remains under pressure ahead of the BOE’s decision, and the eurozone continues to face economic challenges. As the market awaits further economic data and central bank decisions, the focus will remain on how these factors influence currency movements in the near term.
Dollar steadies after Fed losses as sterling weakens ahead of the BOE meeting. Eurozone faces manufacturing concerns.
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