The US dollar weakened against major currencies on Thursday ahead of key economic data releases, including the weekly jobless claims and the Chicago Fed’s National Activity Index for September.
The markets also await the S&P Global flash estimates for the manufacturing and services purchasing managers’ index (PMI) for October, which are due to be released later in the day.
In foreign exchange movements, the USD/EUR pair saw a slight increase, with the euro rising to 1.0799 from 1.0786 at the US market close on Wednesday. By Wednesday morning, the pair stood at 1.0779, reflecting marginal volatility.
Data from the Eurozone indicated a modest improvement in flash manufacturing PMI for October, although the index still points to contraction in the sector. Meanwhile, the services PMI fell slightly but remains above the breakeven mark, suggesting continued expansion in the sector.
According to Kathleen Brooks from XTB, the weakening of the dollar is partly due to growing market expectations that the Federal Reserve will cut interest rates at its next meeting in November, rather than maintaining current rates.
The GBP/USD also strengthened, rising to 1.2979 from 1.2933 at Wednesday’s US close. Data showed that the UK’s manufacturing and services PMIs both experienced a slight decline in October, though both sectors remain in a phase of modest growth.
In Japan, the USD/JPY pair dropped significantly, falling to 151.85 from 152.58 at the US close on Wednesday, and 152.82 on Wednesday morning. October’s flash PMI data for Japan revealed declines in both manufacturing and services, signalling contraction in the economy. The Bank of Japan is set to meet on October 30-31, with markets closely watching for any potential monetary policy shifts.
Meanwhile, the US dollar also weakened against the Canadian dollar. The USD/CAD pair fell to 1.3820 from 1.3836 at the Wednesday close.
This follows the Bank of Canada’s decision to cut its target rate by 50 basis points on Wednesday, following three consecutive 25 basis point reductions. The BoC noted that inflation risks are now “reasonably balanced,” and further rate cuts may be on the horizon, with the next meeting scheduled for December 11.
Global currency markets continue to adjust to the latest economic indicators, with upcoming central bank meetings expected to provide further direction.
