Investing.com – The U.S. dollar climbed to new highs on Friday, with the Federal Reserve sounding more hawkish than its European counterparts, while sterling continued to decline.
At 0500 ET (0900 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was trading 0.1% higher at 105.365, not far from last month’s high of 105.80. week.
The dollar is supported by a relatively aggressive Fed
The American currency was in demand even despite data indicating a slowdown in the economy.
Recent housing and labor market data have been weak, and upcoming data due later in the session is expected to show a slowdown in activity.
However, Fed officials continue to urge caution and more data before agreeing to cut interest rates, and at the latest meeting of the US central bank, the forecast for rate cuts this year was lowered to one in three previously.
In contrast, the Bank began cutting interest rates earlier this month, has cut rates twice, and appears poised to begin cutting rates in August.
“The surprise rate cut by the Swiss National Bank and the Bank of England’s dovish stance have reinforced the view that Europe’s central banks are well ahead of the Fed in cutting rates, which is a positive development for the dollar,” ING analysts said. in the note.
Sterling weakens as August rate cut approaches
fell 0.1% to 1.2652, with sterling nearing a five-week low after the Bank of England’s latest policy meeting.
The Bank of England kept rates unchanged, but some policymakers said the decision not to cut rates was a “finely balanced” decision, raising expectations that policymakers will agree to a cut at their next meeting in early August.
The pound received some support on Friday from data showing the British pound jumped sharply last month after heavy rain in April spooked buyers. Sales volumes rose 2.9% in May, compared with a revised 1.8% fall in April.
fell 0.1% to 1.0692 after falling about 0.4% in the previous session, with weak economic data adding to political concerns in the region.
Business growth in the eurozone has slowed sharply this month, with the bloc’s industry showing some signs of weakening while the country’s recession worsened.
S&P Global’s preliminary index of the region fell to 50.8 this month from 52.2 in May, missing expectations for a rise to 52.5 in a Reuters poll.
“With dovish signals from the European Central Bank’s main European counterparts (Boe and SNB) and investors still very nervous about fiscal and political developments in the EU, the euro is understandably under some pressure in the second half of this week.” , – added to ING. .
Yen falls to eight-week low
In Asia, the pair traded 0.1% lower at 158.81, with the pair down slightly from an earlier rise to a new eight-week high above 159.
The Japanese currency remains in trouble after the Bank of Japan’s decision last week to delay tapering its bond-buying stimulus until its July meeting.
The US Treasury on Thursday added Japan to the list of countries it is monitoring for potential currency manipulator labeling after the Bank of Japan intervened heavily to support the yen as it fell to a 34-year low.
Trading rose to 7.2611, while the Chinese yuan remains under pressure amid doubts about the effectiveness of the country’s economic recovery.