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Dollar stabilized on Friday

The dollar stabilized on Friday, but it was set for its first weekly five-week rise as doubts grew on the ability of other major global central banks, such as the European Central Bank, began to raise interest rates this year.

While the prospect of another Fed interest rate swing is virtually excluded from the money markets this year, markets have also reduced the ECB’s chances of raising interest rates against the backdrop of weak economic data, weighing the single currency.

Monday markets give less than 50% possibility of rising ECB rate hike this year and 80% probability of rate hike from the Bank of England.

Against a basket of its rivals .DXY, the dollar was broadly stable but was set to rise 0.4% on the week, its biggest weekly rise since December.

“For non-dollar currencies to make further gains from these levels, we have to see evidence that other major central banks are preparing to tighten policy,” said Manuel Oliveri, a currency strategist at Credit Agricole in London.

Poor economic data is also a feature in China. On Friday, China’s Statistics bureau revised down its final gross domestic product (GDP) growth in 2017 to 6.8% from 6.9% after lowering initial industry and service estimates.

Still, despite weak economic data, market sentiment was slightly enhanced by signs of increasing optimism in China-US trade talks.

Chinese Vice Premier Liu He will visit the United States on Jan. 30 and 31 for the latest round of trade talks aimed at resolving the trade standoff between the two largest economies in the world.

That optimism was evident in the euro/Swiss franc EURCHF=EBS cross which edged higher towards a one-week high at 1.1329 francs per euro.

The pound managed to keep most of its overnight earnings against the EURGBP = D3 after traders wagered for a second vote on the referendum vote on UK membership in the EU.

While Prime Minister Theresa May repeatedly rejected a second referendum, a vocal campaign to support a new vote led to the support of some lawmakers.

Sterling was last down about 0.2% at 87.90 pence, trading close to a two-month peak of 87.60 scaled overnight. It is set for its biggest weekly gain in more than 15 months.

 

Source: Reuters