Dollar gains on speculation Fed will start to decline soon: October 26, 2021
The greenback rebounded from a one-month low and ended the day higher relative to its peers as comments from Federal Reserve Chairman J. Powell continued to fuel speculation on Friday that the central bank would soon begin to reduce its asset purchases.
Against the Japanese yen, the dollar regained its purchases to 113.47 in Australia and rebounded to 113.82 in the Asian morning. Although it fell back to 113.52 at the European open, the pair then hit session highs at 113.92 in New York open on a broad USD basis before weakening to 113.60 on profit taking, then traded sideways.
The single currency traded with a firm bias in Asia and hit session highs at 1.1665 ahead of the European opening. The pair then encountered further selling there and fell during the European session as the Bundesbank’s monthly report triggered a broad sell in euros to session lows of 1.1591 at the opening. New York in part due to the strength of the USD. Later, the pair made a short-lived rebound to 1.1616 in the New York morning.
Reuters reported that German economic growth is expected to slow sharply in the fourth quarter of the year as the industry continues to suffer from supply shortages and demand for services declines, the Bundesbank said in a regular monthly report on Monday.
Europe’s largest economy boomed over the summer, but unexpected supply chain bottlenecks are now holding back its large auto-manufacturing sector, while higher energy costs and lingering concerns about the coronavirus pandemic could affect consumer confidence, economists said. “Growth is expected to slow considerably in the current quarter,” the Bundesbank said, adding that full-year growth is now expected to be “significantly” lower than its forecast of 3.7% made in June.
The British pound found new buys at 1.3750 in Australia and hit session highs at 1.3791 in the European morning due in part to the cross-buying of the pound, particularly against the euro. However, the cable then erased its gains and fell to an intraday low at 1.3742 in New York open on widespread USD strength before staging a hedging rebound at 1.3797.
Data to be released Tuesday:
United States Building Permits, Red Book, Monthly Home Prices, Consumer Confidence, Richmond Fed New Home Sales and Manufacturing