Investing.com – The U.S. dollar fell to a one-week low on Thursday, giving up some of its recent gains amid uncertainty over the direction of U.S. interest rates and ahead of the release of more labor market data.
At 04:00 ET (0900 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was trading 0.1% lower at 103.855, retreating from a five-month high of 105.10 previously seen on this week.
Uncertainty over Fed tapering plan
Fed Chairman Jerome Powell signaled in a speech at Stanford Graduate School of Business on Wednesday that the US central bank was still reviewing the data before cutting interest rates.
An unexpected slowdown in U.S. services growth but stronger-than-expected private sector job growth created uncertainty on Wednesday.
There’s more data to digest on Thursday, including the weekly one, but Friday’s popular official monthly report will get the most attention.
Ahead of Friday’s data, the focus is also on speeches from other members of the Fed’s rate-setting committee. FOMC members Michelle Bowman and Thomas Barkin will speak at separate events later Thursday.
“Markets are currently pricing in Fed policy easing of 72 bps this year, with the final rate for an easing cycle three to four years from now pegged at around 3.60%,” ING analysts said in a note.
“This terminal rate seems quite high and in December last year it was 3.00%. The dollar will move lower if this terminal rate is reduced. But this will require favorable data from the US, which is far from clear next week.”
Sterling and the euro collapse
In Europe, the index rose 0.2% to 1.0858, helped by data that business activity in the euro zone rose last month for the first time since May 2023.
S&P Global’s eurozone index rose to 50.3 in March from 49.2 in February, improving from its preliminary estimate of 49.9.
However, European inflation was softer than expected on Wednesday, raising expectations for a rate cut by the European Central Bank in June.
rose 0.1% to 1.2578 after economic activity data showed the British economy is on track to emerge from recession when official first-quarter growth data is next published.
The S&P Global Composite Purchasing Managers’ Index, which covers private sector services and manufacturing firms, fell to 52.8 in March from February’s 53.0 but remained firmly above the 50 level that separates contraction from expansion.
The USD/JPY pair is close to the key level of 152
rose to 151.75, remaining close to levels last seen in 1990 as traders were on edge over any potential government intervention in currency markets.
Multiple senior Japanese officials have warned markets against speculation against the yen and that they would not rule out any measures to push the pair lower.
rose to 7.2337, remaining above the closely watched 7.2 level, with sentiment towards the yuan still fragile.