The U.S. dollar held steady near a six-month pinnacle during early European trading on Thursday, bolstered by indications of a robust U.S. economy, even as global economic prospects exhibited signs of weakening.
At 03:00 ET (07:00 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, showed a 0.1% gain, reaching 104.897. It had earlier nearly reached the 105 mark, representing its highest level since mid-March.
Resilience in the U.S. Economy
Recent data released on Wednesday revealed that U.S. service sector activity experienced stronger growth in August than expected. Additionally, a gauge of prices within this sector continued to rise.
These readings have raised concerns regarding the persistence of inflation in the short term, thus reinforcing the Federal Reserve’s hawkish stance.
Later in the session, unemployment data is anticipated to illustrate the continued health of the U.S. labor market. Initial jobless claims are projected to increase slightly to 235,000, compared to the prior week’s figure of 228,000.
Of significant interest on Thursday is the array of Federal Reserve officials scheduled to speak at a fintech conference hosted by the Philly Fed. Following this event, they will enter the blackout period ahead of their forthcoming meeting later this month.
Challenges in the European Economy
Conversely, economic developments in other regions appear less encouraging. The EUR/USD currency pair declined by 0.1% to 1.0719, hovering near its lowest level since June. This followed the news of a 0.8% decline in German industrial production in July compared to the previous month, surpassing the expected 0.5% drop. This data underscores the difficulties encountered by the manufacturing sector in Europe’s largest economy.
Despite warnings from European Central Bank policymakers that the central bank may raise interest rates once more, potentially marking its 10th consecutive hike, there is growing anticipation that the Governing Council may opt for a pause, given the deteriorating economic activity across the region.
Decline in British House Prices
Meanwhile, GBP/USD saw a 0.1% drop to 1.2502, remaining in close proximity to the three-month low recorded in the preceding session. Data from Halifax, the UK’s largest lender, revealed a 4.6% annual decline in UK house prices for August. This suggests the swiftest rate of price descent since the aftermath of the financial crisis, with further declines projected by Halifax.
Chinese Yuan Affected by Weak Trade Data
USD/CNY registered a 0.1% increase to 7.3254, with the yuan reaching its lowest level since November 2022. This depreciation occurred in the wake of disappointing economic figures from China, which also dampened sentiment across Asian markets. China’s imports and exports for August continued to shrink, albeit at a rate slower than initially anticipated.
USD/JPY experienced a 0.1% decline to 147.50, with the yen approaching a 10-month nadir. This decline was influenced by two Bank of Japan officials reiterating the likelihood of the bank maintaining its ultra-dovish policy in the near term.
