Dollar set to post weekly loss; Fed rate peak looms
Investing.com — The U.S. dollar weakened in early European trade Friday, extending earlier losses as traders positioned for the end of the Federal Reserve’s rate-hiking cycle, although moves have been limited ahead of the release of key nonfarm payrolls data later in the session.
At 03:20 ET (07:20 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% lower at 105.892, on course to drop 0.5% this week, just its third week of losses in the last 16 weeks.
The dollar has lost a lot of its popularity this week after the Fed kept rates steady, and offered somewhat dovish signals on more interest rate hikes even while keeping the possibility open.
This spurred increased bets that the central bank was done with its rate hikes for the year, and will begin cutting rates from mid-2024.
“Despite the Fed retaining a tightening bias, it seems investors are more interested in reading and trading a Federal Reserve pause. This has seen interest rate volatility drop and triggered renewed demand for high-yielding FX through the carry trade,” said analysts at ING, in a note.
Attention now turns to the release of the key nonfarm payrolls data for October due later in the day.
Any signs of resilience in the labor market would give the Fed more impetus to hike interest rates, which could in turn reverse some of the dollar weakness seen this week.
Analysts expect to see the U.S. economy added 180,000 jobs in October, down from September's 336,000. The unemployment rate is expected to remain the same, however, at 3.8%, while average hourly earnings are expected to have increased by 0.3% in October, following a 0.2% gain in September.
GBP/USD traded largely unchanged at 1.2202, having risen
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