Market Update: Dollar Gains Amid Economic Data Anticipation
SINGAPORE, Nov 17 – The US dollar saw a slight increase on Monday as investors prepared for a wave of economic reports following the government shutdown. There are hopes for better insights regarding the Federal Reserve’s interest rate decisions for December.
Market reactions to President Trump’s reversal on tariffs affecting over 200 food items were relatively calm. Some analysts noted that this decision wasn’t particularly unexpected, especially in light of the cost-of-living challenges associated with those tariffs.
The British pound faced pressure after a previous surge, with anticipation growing around the UK government’s upcoming Budget announcement on November 26.
Meanwhile, the safe-haven Swiss franc bounced back from a recent high, trading around 0.7954 francs to the dollar, influenced by ongoing volatility in global stock markets.
This week’s attention will center on various US economic indicators, particularly as analysts look for signs of the health of the economy leading up to the release of September’s nonfarm payroll data on Thursday.
“The market is keenly awaiting new information about the US economy after a data hiatus of over 40 days,” remarked a currency strategist from Commonwealth Bank of Australia. She also expressed concerns that a weaker employment report could fuel expectations for a December rate cut, which would likely weaken the dollar further.
On Monday, the dollar regained some strength during Asian trading hours, reversing part of last week’s losses. The euro slipped 0.2% to $1.1597, while the Australian dollar decreased by 0.24% to $0.6521 and the New Zealand dollar dropped 0.18% to $0.5670.
The dollar index, which measures the currency against a basket of others, increased by 0.14% to 99.46. Despite signs from the private sector indicating a further softening of the US economy, investors are pulling back on expectations for a Fed rate cut next month. Current market pricing reflects just over a 40% chance of a 25-basis-point cut in December, down from more than 60% earlier this month.
However, this shift hasn’t significantly bolstered the dollar, which saw notable declines along with US stocks and bonds last week. A strategist from Macquarie Group noted that dollar weakness was likely due to speculative traders exiting positions ahead of anticipated data that could increase market volatility.
Pound Under Pressure
On Monday, the British pound traded 0.3% lower at $1.3137 after a weekend rise fueled by news that Chancellor of the Exchequer Rachel Reeves intends to keep income tax rates unchanged in her upcoming budget. This news caused concern among investors who had hoped for tax increases to address a fiscal shortfall, making government borrowing costs rise on Friday.
Analysts suggest that the Chancellor will need to find significant sums to meet fiscal targets, with a tax increase considered a likely path to achieve this. The euro held steady at 88.25 pence against the pound, near a two-and-a-half-year high.
Concerns linger about the UK government’s ability to manage its budget effectively, which could again raise questions about the fiscal outlook, according to a Commonwealth Bank analyst.
In Japan, the yen remained around the 155 to the dollar mark, last seen at 154.80 yen. Traders are cautious due to the potential for intervention by Japanese authorities to counter the yen’s decline. Last intervened in July 2024, Japan acted when a weak currency exacerbated inflation in food and fuel goods, leading to a 38-year low for the yen against the dollar.
Despite recent data showing Japan’s economy contracted at an annual rate of 1.8% in the last quarter, the yen had little response. This marks the first contraction in six quarters, driven by decreased exports influenced by US tariffs.
