In early European trading on Wednesday, the U.S. dollar exhibited a modest retreat, but maintained its position near a six-month zenith, propelled by apprehensions about global economic growth diminishing risk appetite.
At 03:20 ET (07:20 GMT), the Dollar Index, a gauge tracking the performance of the greenback against a basket of six other major currencies, recorded a marginal 0.1% decline, resting at 104.612, still in close proximity to the six-month pinnacle of 104.90 established overnight.
German Factory Orders Dwindle, Spurring Demand for Safe-Haven Dollar
The U.S. dollar, despite relinquishing some of its recent gains, has preserved its robust stance throughout the early European trading session on Wednesday, buoyed by a series of underwhelming economic data releases that have spurred investors to seek refuge in this safe-haven asset.
This run of discouraging data persisted on Wednesday, as German factory orders slumped by an alarming 11.7% on a month-on-month basis in July, a stark contrast to the anticipated 4.0% decline.
Manufacturing figures emanating from Germany, Britain, and the broader Eurozone all depicted downturns on Tuesday, accompanied by a contraction in their respective service sectors.
EUR/USD managed to advance by 0.2%, trading at 1.0737, after breaching a three-month nadir of 1.0705 overnight. Similarly, GBP/USD climbed 0.2% to reach 1.2582, following its own descent to a three-month trough late on Tuesday.
Eurozone Retail Sales Awaited for Confirmation
Scheduled for later in the session, the release of Eurozone retail sales data is expected to underscore the prevailing trend of decline. Projections indicate a 0.1% drop on a month-on-month basis in July, accompanied by a 1.2% slump on an annual basis, as inflationary pressures continue to bear down on consumers across the region.
With a series of soft economic indicators originating from the Eurozone, speculation has arisen regarding the possibility that officials at the European Central Bank (ECB) may opt for a temporary halt in their ongoing rate-hiking cycle, potentially applying further downward pressure on the euro.
Similarly, the U.S. Federal Reserve is expected to maintain a stable stance later this month, with Fed Governor Christopher Waller signaling on Tuesday that recent economic data affords the central bank the opportunity to observe whether interest rate hikes are warranted.
ISM Non-Manufacturing PMI Data Awaits
Later in the session, the release of the ISM non-manufacturing Purchasing Managers’ Index (PMI) data is anticipated to furnish additional insights into the state of the U.S. economy.
Yen Holds Steady Near 10-Month Low
USD/JPY registered a 0.3% decline, settling at 147.27, as the yen exhibited slight recovery from its earlier plunge to a 10-month nadir.
Japanese officials once again sounded a cautionary note to markets against betting on a weakening yen, with top currency diplomat Masato Kanda asserting that the government “won’t rule out any options” if speculation against the yen persists.
Last year, Japanese authorities intervened to bolster the currency when it reached 30-year lows, and market participants are attentively monitoring developments as the currency pair edges closer to the 150 level.
Chinese Yuan Weakens Further
USD/CNY registered a 0.1% uptick, crossing the 7.3 mark and reaching its weakest level against the dollar since November 2022. This trend has persisted as market concerns continue to revolve around the deceleration of economic recovery in the world’s second-largest economy.
Australian Dollar Gains Momentum
AUD/USD posted a 0.1% gain, reaching 0.6384, with the Australian dollar benefiting from data indicating that the country’s economy expanded slightly more than anticipated during the second quarter, thus alleviating concerns about a potential recession.
