FOREX-Dollar treads water as US economy sends mixed signals, British pound rises


By Harry Robertson and Tom Westbrook

SINGAPORE, November 17 (Reuters)The dollar was little changed on Thursday as investors digested mixed economic data in the United States, while the pound rose ahead of the government budget update.

The greenback has fallen in recent weeks as inflation data and comments from Federal Reserve officials suggest the central bank may soon slow the pace of its punitive interest rate hikes.

Still, the dollar paused on Thursday after U.S. retail sales data for October, released on Wednesday, was stronger than expected.

euro EUR=EBS was stable against the dollar at $1.039, after hitting its highest level since July at $1.048 on Tuesday.

The dollar index, which measures the currency against six major peers, was unchanged at 106.27. The index has fallen more than 7% since hitting a 20-year high in September, although it remained around 10% higher for the year on Thursday.

“Markets have positioned themselves for the Fed to pivot (but) US retail sales data challenges that narrative,” said Kim Mundy, currency strategist at Commonwealth Bank of Australia.

Simon Harvey, senior FX analyst at Monex Europe, said the dollar was treading water as investors try to determine the direction of the US economy.

“The positive consumer data suggests we don’t expect a hard landing (for the economy). But is it positive for risk assets or will it encourage the Fed to go harder?” he said.

Harvey said the biggest price action could be in sterling when Finance Minister Jeremy Hunt announces government budget plans later Thursday. He is expected to raise taxes and cut spending, despite a looming recession, in a bid to boost Britain’s reputation in the markets and calm inflation.

Sterling GBP=D3 rose 0.18% against the dollar to $1.193 in morning trade in London and rose a similar amount against the euro EURGBP=D3.

Traders will also be watching speeches from numerous Fed officials on Thursday for clues on rate hikes. Regional Fed Chairs Raphael Bostic, Loretta Mester and Neel Kashkari are all scheduled to speak.

Hawkish remarks from Fed officials overnight added to doubts about a change in policy, with San Francisco Fed President Mary Daly – until recently one of the more dovish officials – saying a break was off the table.

The dollar fell 0.2% against the Japanese yen JPY=EBS Thursday at 139.28 as it continued to trade around its three-month low. It plunged 3.7% on Thursday last week when US consumer inflation data for October came in below expectations.

The Chinese Yuan CNY=CFXS weakened 0.36% to 7.126 to the dollar as new COVID cases caused concern that officials could order more lockdowns.

The Australian dollar AUD=D3 was 0.15% lower at $0.673, while the Kiwi USD=D3 rose 0.28% to $0.616.

Global exchange rates

(Reporting by Harry Robertson and Tom Westbrook; Editing by Gerry Doyle and Alex Richardson)

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