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Dollar Struggles after GBP/USD Spikes on Bullish Growth Data

10/26/2017, 10:10:44 AMTrading Strategies
Dollar Struggles after GBP/USD Spikes on Bullish Growth Data

The dollar fell against a basket of major currencies on Wednesday after data showing new home sales hit a nearly 10-year high was offset by strong gains in sterling amid bullish UK economic growth.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, fell by 0.29% to 93.56.

The Commerce Department said on Wednesday non-defense capital goods ordersexcluding aircraft, a closely watched proxy for business spending plans, rose 1.3% last month, beating forecast of a 1% increase.

In a separate report, the Commerce Department showed existing home sales increased 18.9% in September from the previous month to a seasonally adjusted annual rate of667,000 units. Economists were expecting a 0.9% decline to 555,000 homes.

Also supporting sentiment on the dollar was growing expectations that a less dovish Fed chair would be appointed amid several reports suggesting that Stanford University economist John Taylor impressed U.S. President Donald Trump in his interview to lead the Fed.

Taylor favors a rule-based approach to monetary policy, which given the current level of both inflation and economic growth implies that rates should be higher than they are now.

The prospect of more a hawkish Fed and bullish economic data, failed to help the dollar shake off losses against both the sterling and euro.

GBP/USD rose 0.94% to $1.3256 following better-than-expected economic growth data.

EUR/USD rose 0.46% to $1.1818 while EUR/GBP fell 0.50% to £0.8911 as investors looked ahead to European Central Bank’s decision on interest rates slated for Thursday.

USD/JPY fell 0.23% to Y113.64 while USD/CAD rose 1% to C$1.2802 as the Bank of Canada kept interest rates unchanged on Wednesday.