FX Roundup: Dollar continues to strengthen on positive US GDP data
The dollar traded higher against a basket of currencies on Thursday, as US second quarter gross domestic product came in higher than previously estimated.
According to the Commerce Department, US GDP expanded by an annualised 3.7% in the three months to June, compared with an initial estimate of 2.3% and ahead of analysts’ expectations calling for a 3.2% increase.
Meanwhile, US businesses increased investment at a 3.2% clip compared to an initial estimate of a 0.6% decline, as spending on structures such as office buildings was revised to show growth of 3.1% instead of a 1.6% drop.
The dollar was trading 0.50% higher against the Japanese yen changing hands at JPY120.52 at 1531 BST. Meanwhile, the pound and euro also fell against the greenback, with £1 fetching $1.5417 down 0.30%, and €1 fetching $1.1242 down 0.64%. The dollar’s rally extended to the Swiss franc up 0.49% exchanging at $0.9595.
The string of positive US data after ‘Black Monday’ cast further doubt on the US Federal Reserve moving to hike interest rates next, which would be unwise according to some.
Kit Juckes, head of forex at Societe Generale, said, “Empirically, all I can observe is a pattern of the Fed raising rates too late, in 2004, 1999 and 2004, and the consequences being pretty dire. However, the key today/tomorrow is whether that message still comes out loud and clear or whether we hear anything about ‘a stitch in time saves nine'; the idea that getting rates a bit higher would be prudent.”
“Markets are a mixture of nervousness (about Fed policy, PBOC policy and the economy) and dovish Fed expectations.”
Elsewhere, the pound continued its rise against the euro up 0.24% changing hands at €1.37080 swinging back and forth for much of the volatile week.
Jane Foley, senior currency strategist at Rabobank, said, “European stock markets took a step back, but later in the day sentiment improved and US stock markets opened and closed higher. This morning most Asian markets opened higher, but fell back afterward. All’n all, the markets have calmed somewhat, but it is a fragile equilibrium.”