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Dollar Hits More Than 1-Month High on Sterling Slump

10/26/2018, 10:47:50 AMMarket Analysis
Dollar Hits More Than 1-Month High on Sterling Slump

The dollar rose to a more than one-month high against its rivals Thursday, shrugging off mostly bearish U.S. economic data as a slump in sterling supported sentiment.

The U.S. dollar index, which measures the greenback against a trade-weighted basket of six major currencies, rose by 0.32% to 96.49.

The greenback remained on track to notch its second weekly gain in a row, even as data showed weakness in the labor market and signs of slowing momentum in business spending ahead of the all-important third-quarter U.S. GDP data due Friday.

The Commerce Department said on Wednesday core durable goods orders rose 0.1% last month, missing economists' forecast for a 0.5% rise.

While the trends for orders are still firmly positive, the indications about business spending were soft in the report as capital goods orders fell for the second-straight month, Wells Fargo (NYSE:WFC) said. "There are signals that business capex is fading."

The U.S. Department of Labor reported Thursday that initial jobless claims increased by 5,000 to a seasonally adjusted 215,000 for the week ended Oct. 20, higher than economists’ forecast for a rise to 214,000.

The soft patch for U.S. housing activity, meanwhile, eased somewhat after the National Association of Realtors’ pending home sales index rose 0.5% to 104.6 last month.

The mostly downbeat economic data, however, did little to keep a lid on the greenback's advance following weakness in both the euro and sterling.

GBP/USD fell 0.5% to 1.2818 as the pair struggled to hold early-session gains, which had followed news that UK Prime Minister Theresa had received the backing from members of her Conservative party, laying to rest, at least temporarily, a challenge to her leadership.

EUR/USD fell 0.30% to $1.1358 as European Central Bank President Mario Draghi said the bank would pursue its tightening policy despite lingering fears about the bloc's economic and political future.

Direction for the single currency will likely be uncertain until a verdict is given on Italy's S&P credit rating, TD Securities said.

USD/CAD, meanwhile, rose 0.19% to C$1.1309 as the loonie gave up some of its gains from a day earlier, when the Bank of Canada hiked rates and turned more hawkish on monetary policy, dropping a reference to "gradual" in its statement.

The yen, meanwhile, was shunned after risk appetite returned in the wake of a rally in global markets.

USD/JPY rose 0.33% to Y113.62.