Dollar advances after data as eyes turn to jobs report

Reuters

Dollar advances after data as eyes turn to jobs report

7:10 chiều giờ GMT, 25 Tháng 10 2024

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U.S. business spending plans exceed expectations

German business sentiment improves, ECB inflation target on track

Japanese yen strengthens ahead of BOJ meeting, election

Updated at 2:52 p.m. ET/1852 GMT

By Chuck Mikolajczak

NEW YORK, Oct 25 (Reuters) -The dollar index rose on Friday, with the greenback set to lock in a fourth straight week of gains after data this week kept interest rate expectations for the Federal Reserve in check while investors looked towards next week's key payrolls report.

The Commerce Department said non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, jumped 0.5% last month after an unrevised 0.3% gain in August and above the 0.1% rise estimated by economists polled by Reuters.

A separate report by the University of Michigan showed October consumer sentiment rose to 70.5 from 70.1, topping the 69.0 estimate, while the one-year inflation outlook fell to 2.7% from the preliminary reading of 2.9% but in line with September's final result.

The dollar was poised for its fourth straight week of gains, as a run of positive economic data hasquieted expectations about the size and speed of the Fed's rate cuts, which has also lifted U.S. Treasury yields.

Investors are now focusing on the October government payrolls report next week, which is likely to be impacted by a strike at Boeing and two hurricanes that hit the U.S. Southeast.

"We had a massive recalibration in economic expectations for the U.S. and that process seems to have largely run its course, the Fed's policy trajectory looks much more reasonable and interest rate differentials between the U.S. and other major economies are stabilizing here," said Karl Schamotta, chief market strategist at Corpay in Toronto.

"Clearly payrolls data is the key variable, and it is still an open question as to whether September's number was an outsized move or an aberration, a statistical aberration and so, next week's report will help to clarify that, but the reality is that we also are going to be taking it with a huge grain of salt."

The dollar index =USD, which measures the greenback against a basket of currencies, rose 0.18% to 104.24, and was up 0.74% on the week, withthe euro EUR= down 0.22% at $1.0803.

In Europe, asurvey on Friday of German business sentiment showed confidence improved more than expected this month, snapping four straight months of declines, offering hope for some respite towards the end of the year in the economy's battle with industrial woes and soft global demand.

European Central Bank (ECB) President Christine Lagarde said the euro zone's inflation is "well on track" to hit the European Central Bank's 2% target next year, reiterating the bank's most recent guidance.

French central bank chief Francois Villeroy de Galhau said the ECB will keep on cutting interest rates and its 3.25% deposit rate remains "quite far" away from a neutral setting.

The dollar has also benefited from a rise in market expectations for a victory next month by Republican candidate and former U.S. President Donald Trump, which would likely bring about inflationary policies such as tariffs.

Markets are pricing in a 95.6% chance for a cut of 25 basis points at the Fed's November meeting, with a 4.4% chance of the U.S. central bank holding rates steady, according to CME's FedWatch Tool. The market was completely pricing in a cut of at least 25 bps a month ago, with a 57.4% chance of a 50 bps cut.

Against the Japanese yen JPY=, the dollar strengthened 0.26% to 152.21. Sterling GBP= edged down 0.02% to $1.2969.

Japanese voters were set tohead to the polls on Sunday for a general election with opinion surveys showing the ruling Liberal Democratic Party (LDP) could lose its dominance that has lasted for more than a decade, possibly complicatingmonetary policy plans for the Bank of Japan (BOJ).

The BOJ is scheduled to meet next week and isexpected to maintain ultra-low interest rates next week, and probably signal a less dovish policy outlook due to receding fears of U.S. recession - and the need to keep speculators from pushing down the yen too much.

Another potential complication for the BOJ was data that showed core inflation in Japan's capital in October dipped below the central bank's 2% target for the first time in five months.

World FX rates https://tmsnrt.rs/2RBWI5E

US consumer sentiment https://reut.rs/3Uin8eX

Reporting by Chuck Mikolajczak; Editing by Richard Chang and Diane Craft

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