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Dollar's Attempt to Cut Losses Dented by Soaring Sterling

8/30/2018, 11:14:29 AMBasics of Trading
Dollar's Attempt to Cut Losses Dented by Soaring Sterling

The dollar was roughly flat against its rivals Wednesday as upbeat U.S. economic data showing the economy remained on solid footing prompted traders to back the greenback, but a strong pound limited gains.

The U.S. dollar index, which measures the greenback against a trade-weighted basket of six major currencies, fell by 0.11% to 94.53.

Gross domestic product increased at a 4.2% annual rate in the April-June period, the Commerce Department said Wednesday, in its penultimate estimate, beating economists' forecast of 4.0% and ahead of the preliminary reading of 4.1% seen last month.

The strong GDP data was driven by contributions from non-residential fixed investment, exports and federal and state government spending, according to the Bureau of Economic Analysis.

But analysts questioned sustainability of above-trend U.S. growth.

"Temporary support from one-off gains coupled with trends of waning momentum, not to mention outright weakness in the housing market, calls into question the sustainability of above-trend topline growth looking out to the second half of the year," Stifel said.

The dollar's advance was stifled by a surging pound after EU negotiator Michel Barnier said he was willing to offer the U.K. a trade deal that has never been offered to a third country, easing fears of the U.K. leaving the European Union without a deal.

"Traders took this as a sign that an agreement between the two sides has a greater likelihood of being achieved," analysts at CMC Markets said in a note.

GBP/USD rose 0.82% at 1.2980.

U.S.-Canada trade relations remained in focus as Canada's Foreign Minister Chrystia Freeland reportedly said she was "optimistic about productive conversations this week," as further trade talks between both nations continued.

USD/CAD fell 0.01% to C$1.2925 as oil prices rose, supporting the loonie, amid data showing crude supplies fell more than expected.

USD/JPY rose 0.51% to Y111.76.