On Thursday, the dollar managed to hold gains versus the EURO , pulling the EURO back from a seven-month high, after U.S. economic data eased worries about a recession and trimmed expectations for an aggressive interest rate cut.
In July, U.S. retail sales increased more than anticipated, an indication that demand wasn’t collapsing, and which may lead to financial markets dialing back expectations for a 0.5% rate cut in September.
In the latest week, fewer Americans than expected also filed for unemployment benefits, indicating a controlled labor market slowdown was still in place, although workers who were laid off were finding it more difficult to find new jobs.
The EURO dropped 0.36% against the dollar at $1.0973. On Wednesday, it hit $1.10475, the highest level for the year, as markets evaluated U.S. inflation numbers.
The U.S. dollar index, which measures its strength against 6 other major currencies, rose 0.42% to 103.03 and lifted from the 8-month low of 102.15 hit last week.
BNP Paribas Asset Management’s FX portfolio manager, Peter Vassallo, said this morning’s data was counter to the Fed’s recent market narrative that was behind the curve and would have to deliver big rate cuts to prevent a recession. Market pricing was adjusted accordingly, and short-term U.S. rate bets have risen significantly.
