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Dollar Falls on Lower U.S. Interest Rates—Will U.S. Economic Data Help It Rebound?

Market Report

Dollar Falls on Lower U.S. Interest Rates—Will U.S. Economic Data Help It Rebound?

Today's Highlights
  1. UK August Gross Domestic Product (GDP)
  2. U.S. September Retail Sales

In the U.S. currency market yesterday, the U.S. dollar temporarily rose against major currencies following the stronger-than-expected U.S. September CPI data. The headline CPI came in at 3.7% year-over-year and the core CPI at 2.6%, both exceeding expectations, and the dollar index hit an 18-month high.The dollar-yen exchange rate also temporarily rose to the upper 158-yen range. However, U.S. interest rates subsequently fell amid safe-haven demand for U.S. Treasuries and cautious remarks from Federal Reserve officials; as a result, during today’s Asian trading session, the Dollar Index has retreated to around 101.99, and the dollar-yen rate has also fallen back to the upper 157-yen range.

European currencies fell the previous day amid a stronger dollar, with the euro/dollar pair dropping to around $1.1155 and the pound/dollar pair to around $1.3187. Today, following a pullback in the U.S. dollar, the euro/dollar pair has rebounded to around $1.1223 and the pound/dollar pair to around $1.3250.The UK’s August GDP figures are scheduled for release at 3:00 p.m., with a month-over-month decline of 0.1% expected. Since industrial production and manufacturing output figures will also be released simultaneously, traders should watch for any heightened volatility in the pound.

Today’s economic indicators include the UK’s August GDP and industrial production at 3:00 p.m., the Eurozone’s August industrial production at 6:00 p.m., and U.S. September retail sales, PPI, and initial jobless claims at 9:30 p.m.U.S. retail sales are expected to rise 0.3% month-over-month, while the PPI is forecast to increase 0.6%. Even after yesterday’s higher-than-expected CPI reading, expectations for a U.S. interest rate hike have not strengthened unilaterally; we will be watching to see how the strength of the pound, the euro, and the U.S. dollar shifts in response to these U.K. and U.S. economic indicators.

桜井 慶介

Author: Keisuke Sakurai

He has over 10 years of experience in FX trading. In the financial sector, he has been involved in investment management with a particular focus on foreign exchange markets and has experience as an asset management advisor. Drawing on his extensive experience, he specializes in technical and fundamental analysis.

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