Dollar dips into the red, as euro climbs higher
The U.S. dollar dipped into negative territory against its major rivals Wednesday, eclipsing gains from earlier in the session and snapping a four-day winning streak.
Where currencies are trading
The ICE U.S. Dollar Index DXY, -0.03% which gauges the dollar against six other currencies, slipped 0.1% to 93.395, and the WSJ Dollar Index BUXX, -0.03% , a measure of the greenback against 16 rivals, added 0.1% at 86.68.
The euro EURUSD, +0.1273% moved to pare its losses in the second half of the European session and rose to $1.1799, compared with $1.1766 late Tuesday.
Against the yen USDJPY, +0.08% the dollar fetched ¥112.89 versus ¥112.20 late Tuesday, reaching a two-week high.
The Canadian dollar USDCAD, +0.0241% rallied after better-than-expected manufacturing data came out earlier in the session, with the U.S. dollar last buying C$1.2471, compared with C$1.2522 late Tuesday.
The British pound GBPUSD, +0.0833% also managed to scope out some modest gains, buying $1.3195, compared to $1.3190 late Tuesday in New York.
The greenback also moved up against Switzerland’s currency USDCHF, -0.0917% to 0.9807 francs from 0.9783 francs, trading at levels last seen in May, according to FactSet.
What’s driving the market
The dollar slipped as the euro picked up the pace in the second half of Wednesday’s trading, which was free of new headlines from Spain and Catalonia and saw equities rallying, as traders prepare for next week’s ECB meeting, which is expected to provide details for the central bank’s QE tapering.
Moreover, a lot of trading activity in euro-crosses, such as euro-pound EURGBP, +0.0784% and euro-yen EURJPY, +0.21% , helped the eurozone currency’s gains, especially as previous shorts in the euro-yen pair began unwinding as no catalyst materialized, said Peter Gorra, head of G-10 currency trading at Nomura.
The euro rallied 0.9% to buy ¥133.19, and 0.2% to £0.8942 on Wednesday.
In the U.K. the British pound gave back the modest gains it achieved after jobs data earlier in the session. Wages adjusted for price inflation fell by 0.4% excluding bonuses, and by 0.3% including bonuses, in the three months to August, the Office for National Statistics said. That marked the sixth straight fall in inflation-adjusted wages.
Elsewhere, Canadian manufacturing data showed an increase in shipments to 1.6% in August from a 2.6% decline in the previous month, beating expectations of negative 0.9%, and giving the Canadian dollar reason to rally.
What are analysts saying?
“It’s not been a great week for sterling bulls. First inflation comes in as expected, disappointing those hoping for a bounce in prices, and then the wage gap stays firmly in place. This should send a firm signal to the BOE to not get too excited about possible rate increases. A brief spike above $1.32 for [the pound against the dollar] was reversed as the pair headed back to the lows of the day. It looks like the rally off the October lows has faded away.”
Chris Beauchamp, chief market analyst at IG
What data are in focus?
U.S. housing starts slipped to 1.13 million in September, missing the MarketWatch consensus forecast of 1.17 million, and slipping from 1.18 million in August. Building permits for the same month came in at 1.22 million, versus 1.27 million in August.
According to the Fed’s Beige Book, the pace of U.S. economic growth was in the modest-to-moderate range, with wage growth and cost of materials on the modest end of the spectrum. Still, the central bank appeared to be on track to raise rates in December, with this season’s destructive hurricanes being just a small hurdle.