FX Rate News

The pound struggled near a six-month low against the dollar on Tuesday, hampered by persistent worries over Brexit that, in turn, weighed on the euro.

The dollar fought for traction against the yen as the prospect of a Federal Reserve interest rate cut later in the month continued to keep the greenback on the defensive.

The pound was a shade lower at $1.2515 following an overnight loss of 0.5%. A slip below $1.2439 would take sterling to its lowest since early January.

The euro was little changed at $1.1260 after shedding 0.1% the previous day, constrained by expectations for a dovish European Central Bank meeting next week.

Sterling was under pressure as investors were nervous about the prospect of eurosceptic Boris Johnson winning the Conservative party leadership contest and becoming the next British prime minister as early as the end of this month.

Poor economic data and signals from the Bank of England that it could cut interest rates instead of raising them as previously expected have also hit the pound.

“The euro has been weighed by the long struggling pound, which in turn is likely to suffer from Brexit-related woes until the Conservative party leader is decided next week,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities.

The dollar was little changed at 107.960 yen.

The U.S. currency rose to a six-week high of 108.990 yen last week but slid after Federal Reserve Chairman Jerome Powell set the stage for a rate cut later this month by highlighting uncertainties facing the world’s largest economy.

The dollar lost further ground against the yen towards the end of last week after Chicago Fed President Charles Evans said on Friday that “a couple” of rate cuts were needed to boost inflation.

“Dollar/yen has strengthened its correlation with U.S. yields since mid-May, rather than move in step with equity prices,” said Daisuke Karakama, chief market economist at Mizuho Bank.

“Prior expectations that higher equities would weaken the yen held by some market participants have been dashed completely.”

The prospect of the Fed easing monetary policy has been a boon to equities, with Wall Street shares advancing to record highs over the past week.

The yen, a perceived safe haven, has often depreciated when stronger investor risk appetite has boosted equities. But the correlation has weakened in the face of falling U.S. yields, which has seen the 10-year yield decline to near three-year lows this month amid looming easing by the Fed.

The dollar index versus a basket of six major currencies was nearly flat at 96.924 after edging up 0.13% the previous day.

The Australian dollar was almost unchanged at $0.7037 after gaining about 0.3% the previous day, getting a lift from Chinese economic data which either matched or beat market forecasts.

The Aussie is sensitive to the economic fortunes of China, Australia’s largest trading partner.

The Australian dollar strengthened on stronger-than-expected economic data from China, which some analysts saw as signalling that moves aimed at reviving spending in the world’s second biggest economy are having some success.

The Aussie gained against the U.S. dollar, which advanced against the safe-haven yen and the Swiss franc.

China’s industrial output bounced in June from a 17-year low in the previous month. June retail sales surged 9.8% from a year earlier, compared with the 8.3% – a slowing from May’s tepid figures – that polled analysts expected.

The Australian dollar rose almost 0.2% to $0.7024 after China’s data release. The yuan strengthened against the dollar to touch its highest since last week.

“China’s economy is finding a base and it was not as weak as feared, so risky currencies go up,” said Imre Speizer head of NZ strategy at Westpac Banking Corporation in Auckland.

“The market is wanting to price a lot of risk into the Aussie,” he said.

China’s quarterly gross domestic product posted its slowest pace of growth in 27 years, as expected, growing by 6.2% in the June quarter compared to a year earlier.

Ray Attrill, head of forex strategy at National Australia Bank in Sydney, said Monday’s figures, on the back of credit data on Friday, showed China’s stimulus program is gaining traction.

“There are signs it is starting to work,” he said.

“Whether you’re building a railway between two cities in China or whether you’re building stuff to sell to the U.S. it seems to need a lot of steel… it is still a good news story for Australia – that’s certainly the way that the market has chosen to interpret the numbers.”

The data also lifted the China-exposed New Zealand dollar by 0.18% to $0.6721.

The U.S. dollar, meanwhile, remains under pressure on expectations of a Federal Reserve rate cut. Comments last week from Fed Chair Jerome Powell and Chicago Fed president Charles Evans indicated U.S. rate cuts are needed to boost inflation.

In the U.S., a 25 basis-point rate cut in July is priced in, along with an almost 20% chance of a 50 basis point cut.

Investors will be looking to U.S. retail sales figures due Tuesday and company earnings for signs of how shoppers and businesses are weathering the slowdown.

Against a basket of currencies the dollar held near a 10-day low at 96.865.

It gained against the yen to break 108.00, though still remains underneath resistance at 108.98. Monday is a national holiday in Japan and dollar-yen trading volumes were thin.

The greenback rose 0.1% to $0.9853 against the Swiss franc. The euro slipped back to $1.265 though remains stuck in a two-cent range that has held the single currency since June.

The dollar eased on Thursday after Federal Reserve Chairman Jerome Powell set the stage for a rate cut later this month, vowing to “act as appropriate” to ensure the world’s biggest economy will be able to sustain a decade-long expansion.

In testimony to Congress, Powell pointed to “broad” global weakness that was clouding the U.S. economic outlook amid uncertainty about the fallout from the Trump administration’s trade conflict with China and other nations.

“Chairman Powell sounded dovish on most dimensions. This is slightly surprising given benign trade developments following last month’s G20 meeting and the recent rebound in nonfarm payrolls,” said Michael Swell, co-head of global fixed income portfolio management at Goldman Sachs Asset Management.

“Overall, his comments around slowing growth against a backdrop of muted inflation and elevated uncertainties is consistent with ‘insurance rate cuts’ this year.”

Adding to a generally dovish tone in his testimony, the minutes from the Fed’s previous policy meeting showed many policymakers thought more stimulus would be needed soon, reviving speculation of an aggressive rate cut.

The euro rose 0.2% in Asia to $1.1274, extending gains after a 0.4% rise the previous day.

The dollar dipped 0.5% to 107.96 yen, extending its slide from a six-week high of 108.99 set on Wednesday before Powell’s testimony.

The dollar’s index against six major currencies slipped 0.2% to 96.877, extending its losses into a second session after Powell’s first day of testimony, and turned negative on the week.

Money market futures have jumped to price in around a 30% chance that the Fed will cut rates by 50 basis points at its next policy review on July 30-31 – a scenario that had been priced out after Friday’s strong U.S. jobs data.

A 25-basis-point cut is already fully factored in.

“A rate cut in July is completely sealed now. But on the other hand, Powell dropped little hint on what he would do after that, as he sounded quite optimistic on the economy,” said Kyosuke Suzuki, director of forex at Societe Generale.

“That uncertainty, I think, will most likely keep the dollar in fairly tight ranges in coming weeks,” he said.

Elsewhere, the British pound also bounced off from six-month lows to trade at $1.2529 <GBP=D4>.

But it is still down on the week as the British currency has been dogged by Britain’s economic gloom and a fast-approaching Brexit deadline.

A raft of dismal UK data and the risk of crashing out of the European Union without agreeing transitional trade arrangements have forced the Bank of England to change its upbeat assessment of the economy.

In contrast, the Canadian dollar moved closer to last week’s eight-month high, as the Bank of Canada showed no sign that it would match potential interest rate cuts from the Fed, making clear it had no intention of easing monetary policy.

The Canadian dollar stood at C$1.3052 per U.S. dollar, not far from C$1.3038 touched a week ago.

In the crypto market, bitcoin shed as much as 8.5% on Wednesday after Fed Chairman Powell made strong comments against Facebook’s digital currency plans. Bitcoin was last down 3.1% at 11,722.21 on Thursday.

Powell said Facebook’s Libra “cannot go forward” until many serious concerns were addressed, comments that pressured the project and dented the price of the original cryptocurrency bitcoin.

The dollar traded near a three-week high on Tuesday against its peers, as investors reduced bets on aggressive U.S. interest rate cuts ahead of the Federal Reserve chairman’s testimony to Congress on the economy.

Sterling was pinned near a six-month low versus the dollar on speculation the Bank of England will soon join other major central banks in easing monetary policy in response to growing worries about the global economy and Britain’s exit from the European Union.

Fed chief Jerome Powell’s comments in two-day testimony to Congress beginning on Wednesday will be closely watched to determine whether traders will continue to pare bets for deep interest rate cuts, which could help the dollar continue its rebound against major currencies.

“The dollar is bouncing back, so there are some downside risks for the euro and cable,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securities in Tokyo.

“There is a risk the Fed will not be as dovish as people thought. Central banks ahead of the curve in this cycle are Australia and New Zealand. The Fed is following, but the European Central Bank and the Bank of England are laggards.”

The dollar index versus a basket of six major currencies was little changed at 97.374 on Tuesday, which was close to a three-week high of 97.443 hit on Friday.

The greenback was steady at 108.75 yen, near a six-week high of 108.81 yen reached on Monday.

Investors will closely analyse Powell’s comments when he delivers his semi-annual monetary report before Congress to gauge how far the U.S. central bank will lower interest rates.

A sharp rebound in U.S. job growth in June reduced expectations that the Fed will cut interest rates by 50 basis points when it meets at the end of July.

A week ago, the market forecast an 80.1% chance of a 25-basis-point cut, and a 19.9% chance of a 50-basis-point cut, according to CME Group’s FedWatch tool. The chances are now 98% and 2%, respectively.

The British pound was last quoted at $1.2515, within striking distance of $1.2481, its lowest since the “flash crash” on January 3 when the pound dropped to $1.2409.

Data on UK gross domestic product and industrial output are due Wednesday, while the Bank of England will release its financial stability report on Thursday, which could help traders gauge whether the BoE will take a more dovish view of the economy.

The euro traded at $1.1216, near a three-week low of $1.1207.

The Turkish lira was steady in early trade in Asia after weakening sharply following President Tayyip Erdogan’s dismissal over the weekend of the central bank governor, sparking worries about the bank’s independence.

The lira at one point slid to a two-week low of 5.8245 to the dollar and was last quoted at 5.7291.

The dollar held near three-week highs in early trading on Monday, holding on to its gains after last week’s strong U.S. jobs data lowered expectations for a sharp Federal Reserve interest rate cut.

Elsewhere, the Turkish lira fell sharply after President Tayyip Erdogan dismissed the central bank governor, sparking worries about the bank’s independence.

U.S. non-farm payrolls rebounded in June to 224,000, the most in five months, data showed on Friday, beating economists’ consensus estimate of 160,000.

The solid outcome virtually wipes out chances for a half point Fed rate cut at the end of July, but modest wage gains and other data showing the world’s largest economy was losing steam could still encourage the central bank to cut rates by 25 basis points.

“We still expect the Fed to deliver a 25 basis point rate cut this month.

The underlying trend for employment growth is still weakening, ” MUFG analysts wrote in a research note.

“Nevertheless, the US dollar should continue to trade on a firmer footing in the near-term given downside risks from a larger rate cut have diminished.”

The dollar index stood at 97.229 in early London trading, below the near 3-week high of 97.443 it hit on Friday.

The greenback’s rebound follows a period of weakness as mounting expectations for Fed rate cuts weighed on the currency.

The euro, which dropped to $1.1208 on Friday, traded at $1.1225, unchanged on the day.

The common currency came under pressure on Friday after data showed that German industrial orders fell far more than expected in May.

Traders’ focus quickly shifted to Federal Reserve Chairman Jerome Powell’s Congressional testimony, due on Wednesday and Thursday, as well as U.S. inflation data out later this week.

The British pound hit a six-month low to the dollar on Friday, after poor economic data and a rise in expectations that the Bank of England will cut interest rates.

It was last quoted at $1.2513, down 0.2% on the day.

The Turkish lira slid to as low as 5.8245 to the dollar, its lowest in two weeks, in early Asian trade. It last stood at 5.735, down 1.8% on the day.

“Some naive market participants might still hope that the new central bank governor will come across as being independent in a statement announced for this week and at least does not cut interest rates right away,” Commerzbank  analysts said.

“That may be the case but does not change the fact that medium term sensible Turkish monetary policy will not be possible.”

In a written statement on Saturday, new governor Murat Uysal said he would implement monetary policy instruments independently with a focus on achieving and maintaining the primary objective of price stability.

The Japanese currency strengthened 0.1% to 108.34 yen per dollar, above 3-week lows of 108.64 yen.

The dollar was on the back foot on Thursday, trading near a one-week low versus the yen as falling Treasury yields boosted expectations the U.S. Federal Reserve will cut interest rates this month for the first time in a decade.

Government bonds are in the middle of a global rally, which has pushed U.S. Treasury yields to the lowest in more than 2-1/2 years and sent European rates to record lows on increasing bets major central banks will ease policy to bolster the global economy.

Waning expectations for a quick resolution to the United States-China trade war also hurt sentiment for the dollar.

The focus now shifts to U.S. non-farm payrolls data due on Friday, which economists expect to have risen by 160,000 in June, compared with 75,000 in May.

Positive payroll data is unlikely to buoy the dollar as expectations for U.S. rate cuts are strong, given low inflation and the fallout from the tariffs the United States and China have already imposed on each other’s goods.

“Everyone from the Reserve Bank of Australia to the Fed is talking about inflation disappointing to the downside,” said Mayank Mishra, macro strategist at Standard Chartered Bank in Singapore.

“The Fed arguably has more room to ease than anyone else. That, in theory, should lead to a weaker dollar.”

The dollar was little changed at 107.80 yen on Thursday, after touching a one-week low of 107.54 yen on Wednesday.

The greenback has fallen 3.5% versus the yen in the past three months amid growing signs the Fed will cut rates at its July 30-31 meeting.

Benchmark 10-year U.S. yields touched 1.939%, the lowest since November 2016, before recovering slightly. Lower yields reduce the appeal of holding the dollar.

The dollar index against a basket of six major currencies was slightly lower at 96.734.

Global forex trading likely will be subdued on Thursday as U.S. financial markets are closed for a public holiday.

U.S. President Donald Trump’s administration said on Wednesday it is scheduling a call with Chinese negotiators next week that would mark the resumption of talks between the two countries.

Expectations for a smooth path to resolving the dispute have waned after Trump said any agreement would have to be tilted somewhat in favor of the United States.

Adding to a sense of unease about trade talks, Trump late on Wednesday repeated his view that China and Europe are manipulating their currencies to pump money into their economies and said the United States should match these efforts, according to a tweet.

“When U.S. yields are this low, you can’t expect people to pile in and buy the dollar,” said Junichi Ishikawa, senior foreign exchange strategist at IG Securities in Tokyo.

“Sentiment is tilted toward testing the dollar’s downside. There are expectations for lower rates in Europe and Britain, so it may be easier for the dollar to move versus the yen.”

The Australian dollar stood at $0.6929, having climbed 0.5% overnight and away from a $0.6956 low touched early in the week.

The RBA has already cut rates this month to a record low of 1.00% and futures imply a 92% chance rates will be down at 0.75% by Christmas, but the Aussie has rebounded due to expectations that central banks in the United States and Europe will ease policy even further.

The euro was little changed at $1.1285 on Thursday, near a two-week low of $1.1268.

The common currency has weakened since IMF Managing Director Christine Lagarde, perceived as a policy dove, was nominated as the next European Central Bank president.

Sterling traded hands at $1.2586, mired near a two-week low of $1.2557 due to speculation the Bank of England will abandon its preference to raise interest rates and swing to the dovish camp as the trade war and uncertainty about Britain’s negotiations to leave the European Union impact the outlook.

The dollar struggled for traction on Wednesday as fading hopes for any near-term Sino-U.S. trade deal revived safe-haven demand and drove U.S. bond yields to their lowest levels since late 2016.

U.S. yields also tracked a decline in their British counterparts to 2-1/2-year lows on dovish-sounding comments from Bank of England Governor Mark Carney, which in turn weighed on the pound.

The dollar index against a basket of six major currencies was a shade lower at 96.697 after pulling back from 96.875 scaled on Tuesday, its highest since June 20.

The pound was steady at $1.2592 after shedding 0.35% the previous day, when it touched a two-week trough of $1.2584.

The BoE’s Carney said on Tuesday that a global trade war and a no-deal Brexit were growing risks to Britain’s economy, which might need more help to cope with a downturn, prompting investors to increase their bets on central bank easing.

The dollar lost 0.3% to 107.580 yen, having been nudged off a 12-day high of 108.535 scaled at the start of the week.

“The dollar fell below 108.00 yen again in light of BoE Governor Carney’s dovish comments, which helped depress global bond yields,” said Shinichiro Kadota, senior strategist at Barclays in Tokyo.

“Yields declined as the BoE, up until now, was seen as the only central bank which was not as dovish as others.”

The euro was little changed at $1.1291 following a volatile session on Tuesday, when it swung between a low of $1.1275 and a high of $1.1322.

The common currency had received a lift after a media report that European Central Bank policymakers are in no rush to cut interest rates at a July policy meeting. But it later slipped after IMF Managing Director Christine Lagarde, perceived as a policy dove, was nominated as the next ECB president.

“It will be difficult for Lagarde to emulate the eye-catching policy steps which (current ECB President Mario) Draghi implemented,” said Daisuke Karakama, chief market economist at Mizuho Bank.

But the euro zone’s requirements will remain the same -it needs lower yields and a weaker currency – and the ECB is unlikely to undergo a dramatic change in policy under Lagarde, he added.

The Australian dollar was flat at $0.6991 after gaining about 0.4% the previous day. The Aussie had advanced after the Reserve Bank of Australia cut interest rates but offered a more balanced outlook.

The 10-year U.S. Treasury yield extended an overnight fall and brushed 1.948%, its lowest since November 2016.

At the G20 summit in Japan last weekend, Washington and Beijing agreed to restart trade talks after U.S. President Donald Trump offered concessions.

But investors were wary about the chances of a resolution to the year-long trade war between the world’s two biggest economies, especially given the recent breakdown in talks in May and Trump’s comments that any deal would have to be tilted in favor of the United States.

Sentiment was also dented by Washington’s threat of tariffs on $4 billion of additional European Union goods in a long-running dispute over aircraft subsidies.

The dollar and offshore Chinese yuan rallied on Monday after the United States and China agreed to restart their troubled trade talks, while the Japanese yen and Swiss franc were the big casualties as investors sold safe-haven currencies.

While reports of an agreement had been flagged ahead of U.S. President Donald Trump and his Chinese counterparty Xi Jinping’s meeting on the sidelines of the G20 meeting, the outcome was more positive than investors had expected.

Trump said he would hold back on new tariffs and that China will buy more farm products.

Trump also said the U.S. Commerce Department would study whether to take Huawei off the list of firms banned from buying components and technology from U.S. companies without government approval.

Global stocks jumped and investors dumped safe-haven assets.

China’s offshore yuan rose more than 0.5% to as high as 6.8165 yuan per dollar, near a two-month high, before easing back to 6.8464 after disappointing factory activity data.

The dollar, which has fallen in recent weeks on rising expectations for Federal Reserve interest rate cuts, rose 0.4% against a basket of currencies, its index hitting 96.601. Versus the euro it rose 0.4% to $1.1328.

“The compromise reached between Trump and Xi at the week’s G20 meeting went further than most had expected, with Trump putting the next tranche of tariffs on hold and reopening US companies’ ability to supply Huawei,” said RBC  currency strategist Adam Cole.

“It is not clear, however, whether the latter will clear congress and there is plenty of scope for trade talks to break down again in the future.”

The Japanese yen, which investors tend to buy when they are looking for a safe place to put their money, dropped 0.6% to as low as 108.53, its weakest since June 19.

The Swiss franc lost 0.4% versus the euro to 1.1142 francs. It also slumped 0.8% against the dollar.

The Australian dollar, sensitive to the economic fortunes of China, the country’s largest trading partner, dropped 0.4% at $0.6993, with the weaker-than-expected factory data out of China overshadowing the trade ceasefire.

Britain’s sterling slipped 0.2% to $1.2670.

This week sees the release of some crucial U.S. economic data including non-farm payrolls on Friday and non-manufacturing activity on Wednesday, which should help investors better assess whether the Federal Reserve will cut interest rates later this month.

“Some Fed officials curbed easing views recently and the data will help the market get a clearer picture of whether the Fed stands poised to cut rates this month,” said Koji Fukaya, director at FPG Securities.

The dollar edged up to a one-week high against the safe-haven yen on Thursday, as some of the jitters ahead of the G20 summit in Japan eased amid hopes for progress there in resolving the Sino-U.S. trade war.

Hong Kong’s South China Morning Post, citing sources, said that the United States and China have agreed to a tentative truce in their trade dispute ahead of a meeting between leaders of the two nations on Saturday on the sidelines of the G20 summit.

The greenback added about 0.3% to 108.13 yen, its highest since June 20.

On Wednesday, the U.S. currency already rose significantly versus the yen, a perceived safe-haven which draws bids in times of political strife, on comments from U.S. Treasury Secretary Steven Mnuchin about a trade deal between the United States and China is “about 90%” complete.

Later, analysts realized Mnuchin’s comment on degree of progress in talks was in the past tense, though the cautious optimism remained intact.

Investors are focusing on whether U.S. President Donald Trump and Chinese President Xi Jinping, at their Osaka meeting, can pave the way to resolve a trade dispute between the world’s two biggest economies.

“While the market easily swings back and forth on U.S.-China headlines, the real focus going into the G20 is on low Chinese economic growth and its impact on the markets,” said Makoto Noji, chief currency and foreign bond strategist at SMBC Nikko Securities.

“If the U.S.-China relationship show an improvement at the G20, China likely will no longer be in a hurry to implement steps to simulate its economy.”

The Group of 20 summit was also expected to impact the policy stance of the Federal Reserve, which opened the door to possible monetary easing in coming months after last week’s meeting.

The potential implications of the Trump-Xi meeting for U.S. monetary policy are huge, said Masafumi Yamamoto, chief forex strategist at Mizuho Securities.

“If the two sides agree not to impose more tariffs, the Fed would no longer need to cut rates,” he said. “On the contrary, if the talks point to the imposition of more tariffs, that could nudge hesitant policymakers towards rate cuts.”

At the start of this week, the dollar took a hit — it reached a six-month low of 106.780 yen on Tuesday — on the Fed’s dovish turn.

On Thursday, the dollar index against a basket of six major currencies rose 0.15% to 96.374.

The index had retreated to a three-month low of 95.843 at the start of the week amid the Fed’s easing prospects. But it has managed to regain some traction after comments this week from central bank officials such as Chair Jerome Powell that tapered expectations for aggressive rate cuts.

The euro dipped 0.2% to $1.1351.

The Canadian dollar was on a steady footing as crude oil’s surge supported commodity-linked currencies.

The loonie traded at C$1.3131 per dollar after advancing overnight to C$1.3108, its strongest since early February.

Oil prices surged as U.S. stockpiles of crude and refined products decreased.

The New Zealand dollar was near a two-month peak of $0.6693 scaled on Wednesday, when the currency bounced after the Reserve Bank of New Zealand refrained from lowering rates.

The Australian dollar inched up to a 2-1/2-week high of $0.699