Dollar keeps rising; euro falls to two-year low on weak data

The US dollar climbed to a new high Friday, while the euro slumped as data continued to illustrate the weak state of the eurozone economy. 

At 05:00 ET (10:00 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.6% higher to 107.614, after earlier climbing to its highest level since early October, 2023.  Dollar heads relentlessly higher 

The dollar has gained some 3% so far this month in the wake of Donald Trump’s presidential election victory on expectations that his policies could reignite inflation and limit the Fed's ability to cut rates.

The release of solid employment data on Thursday also helped the tone, as jobless claims unexpectedly slowed. 

“It was, however, some Fedspeak that likely encouraged dollar buying as New York Fed President John Williams – not usually a hawk – said the US is ‘not quite there yet’ on inflation and that the jobs market needs to cool further for easing,” said analysts at ING, in a note.

Markets now see a 57.8% chance of a 25-basis-point cut, down from 72.2% a week ago, according to CME's FedWatch Tool.

The US currency’s safe haven status has also been a boon given the recent escalations in the conflict between Russia and Ukraine.

“Markets are clearly taking the escalation in the Russia-Ukraine war more seriously, which is favoring a broader rotation to haven assets like the dollar,” ING added. Euro slips to two-year low

In Europe, EUR/USD traded 0.8% lower to 1.0389, falling to its lowest level in two years, with the single currency weighed by the region’s weak economic outlook as well as being buffeted by events in Ukraine this week.

Eurozone business activity took a surprisingly sharp turn for the worse this month as the bloc's dominant services industry contracted and manufacturing sank deeper into recession, a survey showed on Friday.

The preliminary composite eurozone Purchasing Managers' Index , compiled by S&P Global, sank to a 10-month low of 48.1 in November, below the 50 mark separating growth from contraction.

“The release has risen from being almost disregarded to a de-facto critical input for policy decision given the Governing Council’s greater focus on forward looking indicators of growth,” ING said.

Earlier in the session data showed that Germany's economy , the largest in the eurozone, grew less than previously estimated in the third quarter, expanding by 0.1% in the third quarter of 2024, down from a preliminary reading of 0.2% growth.

GBP/USD fell 0.4% to 1.2536, falling to its weakest against the dollar since May, as British business output shrank for the first time in more than a year.

The preliminary S&P Global Flash Composite Purchasing Managers' Index , fell to 49.9 in November - below the significant 50.0 level for the first time in 13 months - from 51.8 in October. Yen gains after Japanese CPI

USD/JPY fell 0.1% to 154.38, after Japanese consumer price index inflation grew slightly more than expected in October, while the core measure rose above the central bank's annual target band, keeping bets alive for another rate hike by the Bank of Japan.

USD/CNY climbed 0.2% to 7.2491, near a four-month high. 

The yuan has depreciated as much as 1.8% against the dollar so far in November, as inadequate signals on Chinese stimulus measures also weighed on local markets. 

 

Source: Investing.com