The US dollar fell on Thursday, struggling to find its footing after weak economic data raised expectations of a major interest rate cut by the Federal Reserve later this month.
At 04:35 ET (08:35 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was down 0.2% at 101.139, extending its retreat from a two-week high of 101.79 hit at the start of the week.
Will there be a big Fed rate cut?
The US dollar has struggled to find friends for much of this week after disappointing US economic data raised the prospect of a hard landing for the world’s largest economy and an aggressive US Federal Reserve policy easing.
The survey, conducted on Tuesday, showed that the sector remained in contraction territory, while jobs in the United States fell to a three-and-a-half-year low in July, indicating that the labor market is losing strength.
There is weekly and other data to digest later in the session, before the crucial monthly report on Friday.
Traders now see a 45% chance of the Fed cutting rates by 50 basis points when it meets later this month, and have priced in cuts of more than 100 basis points by the end of the year.
“Unless there is a sharp decline in some of today’s numbers, we expect the dollar index to trade in the 101-102 range. But the bias over several weeks is bearish,” analysts at ING Bank said in a note.
Euro and pound rise
In Europe, the euro rose 0.1% to 1.1086, as the single currency was helped by German industrial orders unexpectedly rising in July.
German orders rose 2.9% in July from the previous month, data showed on Thursday, a big improvement over expectations for a 1.5% decline.
Additionally, the statistics office revised up data for June to show a 4.6% month-on-month increase from a previous figure of 3.9%.
Eurozone data for July is due later in the session, and is expected to show a slight improvement after a 0.3% decline in the previous month.
ING added: “EUR/USD has held support at 1.1040 this week and is likely to consolidate just below 1.1100 – unless US data surprises to the downside today.”
The pound rose 0.1% against the US dollar to 1.3157, with the pair up more than 3.5% over the past month, supported by expectations that the Bank of England will keep interest rates higher for longer than the US.
Yen nears one-month high
In Asia, the yen fell 0.1% to 143.62, supported by safe-haven demand for the yen, but also on the view that an imminent interest rate hike by the Bank of Japan goes against the grain of the global monetary easing cycle.
The yen rose to a one-month high of 143.20 earlier in the session, and since the start of the week, it has risen about 1%.
The US dollar index fell 0.2% to 7.0999, hovering near its strongest levels in more than a year.