Posted on March 2, 2015 by the XM Investment Research Desk at 8:05 am GMT
The US dollar was trading in a positive manner, as its trade-weighted index versus a basket of currencies hit a new 11-year high during today’s Asian trading. A cut in Chinese interest rates helped to buoy the dollar, as the yuan and other emerging Asian currencies dropped.
The dollar was strong after data on Friday showed that US GDP growth for the 4th quarter was at 2.2% – less than the 2.6% originally estimated but higher than the 2.1% analysts’ expectation. During an event on Friday, Fed officials such as the bank’s Vice-President Stanley Fischer said that a rate hike could happen either in June or in September and the decision will be data-dependent.
On Saturday, the People’s Bank of China lowered both the deposit and the lending rate by a quarter point to 2.5% and 5.35% respectively in a move that was perhaps expected – only the timing maybe was somewhat of a surprise. PMI numbers – both official and private-sector – came in overall better than expected on Sunday and Monday.
The Australian dollar was under pressure despite the Chinese rate cut and positive PMIs. Anticipation of tomorrow’s Reserve Bank meeting, during which an interest rate cut is expected to be announced, kept sentiment negative and drove the aussie down to 0.7760.
The euro was also under pressure ahead of this week’s ECB meeting, as it made a fresh 1-month low around 1.1170.
Looking ahead Eurozone flash inflation for February and unemployment for January will come out, as will UK manufacturing PMI. Headline Eurozone inflation is expected to be announced at -0.5% year-on-year, but core inflation is staying above 0 at 0.6%. In the United States, Personal Income and Spending and Personal Consumption Expenditure prices will come out near the start of the session, followed by ISM manufacturing PMI.