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Dollar Gains Slightly In Early Asia Ahead of Japan Retail Sales

10/30/2017, 11:01:49 AMMarket Analysis
Dollar Gains Slightly In Early Asia Ahead of Japan Retail Sales

The dollar edged higher in early Asia on Monday with retail sales out of Tokyo coming up.

USD/JPY changed hands at 113.72. up 0.03%, while AUD/USD traded at 0.7674, down 0.04%.

Japan reports retail sales for September with a 2.5% gain on year expected.

Investors will be focusing on Wednesday’s Fed meeting for fresh clues on the likely trajectory of monetary policy. Friday’s U.S. jobs report for October will also be closely watched.

Thursday’s BoE meeting will also be in focus along with euro zone growth and inflation data on Tuesday.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was last quoted up 0.18% at 94.72 in late trade.

Last week, the dollar pared gains on Friday after rising to the highest level in over three months on data showing that the U.S. economy grew more than expected in the third quarter.

The dollar eased following a report that U.S. President Donald Trump is considering nominating Federal Reserve Governor Jerome Powell to lead the U.S. central bank, a move that would signal continuity for monetary policy.

Powell is seen less hawkish than Stanford University economist John Taylor, another potential nominee to lead the Fed.

The dollar rose earlier after the Commerce Department reported that the U.S. economy grew at a 3% annual rate in the third quarter, better than forecasts for growth of 2.5%.

The stronger-than-expected reading underlined the case for the Fed to raise interest rates at a faster pace in the coming months. Higher rates tend to make the dollar more attractive to yield seeking investors.

The dollar had already received a boost on Thursday after House Republicans passed a budget blueprint for 2018, setting the stage for a tax overhaul. Some investors believe tax reforms could bolster growth and prompt the Fed to raise rates at a faster pace.

The euro remained on the back foot after the European Central Bank said Thursday it is extending its bond purchases into September 2018 while reducing monthly bond purchases by half to 30 billion euros per month from January.

The single currency was also pressured lower after Catalonia’s parliament on Friday declared independence from Madrid. The move prompted Spain’s prime minister to sack the Catalan government and call elections next month.

The pound was pressured by the prospect of a dovish rate hike, one which will not be followed by further rate rises, ahead of the upcoming Bank of England policy meeting.