(Bloomberg) -- The dollar fell versus all currencies in the Group of 10 amid month-end flows, with the euro rising after the European Central Bank’s Isabel Schnabel said it needs to be wary of cutting interest rates too far.
- The Bloomberg Dollar Spot Index traded 0.6% weaker Wednesday; it was at the lowest level in a week
- The Federal Reserve’s preferred measure of underlying inflation accelerated in October from a year ago, helping explain policymakers’ more cautious approach to lowering rates
- Gross domestic product increased at a 2.8% annualized pace in the third quarter, the second estimate of the figures from the Bureau of Economic Analysis showed Wednesday. The economy’s primary growth engine — consumer spending — advanced 3.5%, the most this year.
- “The Fed’s action is up in the air, but most attention is focused on the incoming administration and fundamentally, we don’t know what we don’t know yet,” said Helen Given, a foreign-exchange trader at Monex. “We could see some pullback in long-dollar positioning as traders attempt to hedge on both sides of the market”
- “Tariffs are still the big story,” she explained
- NOTE: US markets will be closed Thursday due to local holiday
- USD/CAD fell 0.1% to 1.4035
- “The market has a strong memory for the Trump tariff announcement on Monday evening, which was more punitive to Canada than expected,” said Sarah Ying, head of foreign-exchange strategy at CIBC Capital Markets
- “We don’t think GDP on Friday will be a big CAD mover (it historically is not), so we suspect to see USD/CAD above 1.40 in the coming days,” she said. “The market is reluctant to break 1.42 though”
- Canada to report on GDP in Sept. and 3Q Friday
- “Our call for USD/CAD to appreciate to 1.45 in 2025 whilst acknowledging that USD/CAD risks extending more than that (145/1.50 range) even if the US imposes milder, trade-related tariffs on Canada,” said Shaun Osborne, chief foreign-exchange strategist at Scotiabank. “if it does come to 25% tariffs, the overshoot risks being even greater”
- EUR/USD rose 0.7% to 1.0562
- Money markets pared bets on ECB rate cuts after Schnabel comments
- Implied volatility on the European common currency climbed, up for the first time in three days and approaching its 2024 peak
- READ: HSBC Strategist Sees Euro Falling Below Parity by End of 2025
- TS Lombard strategists recommend shorting EUR/JPY at 159.40 spot on the view that the Bank of Japan will hike rates to 1% by mid-2025
- EUR/JPY fell 0.7% to 159.52 Wednesday
- USD/JPY falls 1.3% to 151.07
- NZD/USD climbed 1.1% to 0.5895, one-week high; RBNZ cut rates by half a percentage point as anticipated by a majority of economists surveyed by Bloomberg and signaled a more hawkish-than-expected outlook for 2025
- AUD/USD rose 0.3% to 0.6496; Australia’s CPI indicator for October advanced 2.1% from a year earlier, below economists’ estimate of a 2.3% increase, data from the Australian Bureau of Statistics showed
- GBP/USD up a third day, gains 0.8% to 1.2674
Reporting by Anya Andrianova and Vassilis Karamanis
