Noor Trends News, Technical Analysis, Educational Tools and Recommendations
The U.S. dollar continued to weaken on Thursday, with the Dollar Index, which measures the greenback against a basket of six other currencies, dropping 0.2% to 103.950 as of 05:25 ET (09:25 GMT). This decline extended the dollar’s losses from the previous session.
Dollar Retreats Ahead of Key Economic Data
The decline in the dollar comes amid growing expectations that the Federal Reserve may cut interest rates in September. Investors are closely watching the upcoming second-quarter gross domestic product (GDP) data, expected to show annualized growth of 2.0%. While this is an improvement from the 1.4% growth in the first quarter, it remains significantly lower than the 4.2% pace recorded in the latter half of the previous year.
The GDP report is also anticipated to reveal a substantial slowdown in inflation, with the GDP price index forecasted to drop to 2.6% from 3.1%. This sets the stage for Friday’s Personal Consumption Expenditures (PCE) price index data, which the Federal Reserve uses as its preferred inflation measure. The Fed is widely expected to keep interest rates unchanged at its upcoming meeting but may signal a rate cut in September.
Euro Gains Slightly Despite Weak German Data
In Europe, the euro made modest gains, with EUR/USD rising 0.1% to 1.0847. This uptick came despite disappointing data from Germany, where the Ifo business climate index fell to 87.0 in July from 88.6 in June, marking the third consecutive decline in this key economic indicator.
The European Central Bank (ECB) recently kept interest rates steady at 3.75%, but market sentiment suggests there could be up to two more rate cuts by the ECB before the end of the year.
Pound Edges Lower Ahead of Bank of England Meeting
The British pound weakened slightly, with GBP/USD trading 0.2% lower at 1.2885, as it pulled back from the 1.30 level. Investors are cautious ahead of the Bank of England’s policy meeting next week. UBS analysts anticipate that the central bank may begin a gradual reduction in interest rates, though the timing remains uncertain.
Yen Strengthens on Speculation of BOJ Intervention
In Asia, the Japanese yen strengthened significantly, with USD/JPY falling 0.7% to 152.72, its weakest level in 2.5 months. This move reflects a shift in market sentiment as traders reduce short yen positions in anticipation of the Bank of Japan’s (BOJ) meeting. There is speculation that the BOJ may consider a modest interest rate hike and possibly unveil plans to reduce bond purchases in the coming years. This speculation has been fueled by suspected currency market interventions by the Japanese government.
Chinese Yuan Remains Under Pressure
The Chinese yuan also experienced pressure, with USD/CNY slipping 0.5% to 7.2281, remaining near an eight-month high. Concerns over China’s slowing economic recovery persist, exacerbated by unexpected rate cuts from the People’s Bank of China, which have failed to bolster confidence in the country’s economic outlook.
