Currency traders digested another blow to European market confidence on Tuesday, after a third-quarter eurozone GDP reading disappointed, while dollar traders received President Donald Trump’s assessment of a possible trade deal with China as a positive factor.
For the eurozone, preliminary GDP numbers came in below expectations, adding to existing concerns about the currency bloc. The eurozone’s economy expanded by 1.7% year-over-year in the months between July and September, compared with consensus expectations of 1.8% and the previous growth rate of 2.2%.
“With growth in the region slowing, the uncertainty of Brexit looming and the fresh spectre of political disarray after Angela Merkel announced [Monday] that she will step back from politics and end her career as chancellor when her term expires in 2021, the euro now faces an array of risks that could pressure the currency to a fresh multi-month low,” wrote Boris Schlossberg, managing director of FX strategy at BK Asset Management.
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The euro EURUSD, -0.0967% slipped to $1.1350 versus $1.1374 late Monday in New York. With the month almost over, the shared currency is on track for a 2.2% October decline, according to FactSet.
Meanwhile in the U.S., the dollar strengthened as Trump spoke of a “great deal with China” in an interview with Fox News, thereby alleviating, for now, market anxiety about the trade spat between the world’s two largest economies.
The ICE U.S. Dollar Index DXY, +0.24% , which measures the buck against six of its major rivals, was last up 0.3% at 96.896. The gauge is taking a course toward 97, which it last touched in May 2017, according to FactSet. For all of October, the index is on track to gain 1.9%, its best monthly performance since May.
In Asian trading, China’s yuan touched its weakest level in a decade versus the dollar after Chinese authorities moved the yuan fixed range lower. One dollar last fetched 6.9641 yuan USDCNY, +0.0402% in Beijing and 6.9726 yuan USDCNH, -0.0373% in the offshore market.
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“However, we repeat our advice that the market should not read too much into the likelihood that dollar-yuan will break above 7,” cautioned Win Thin, global head of currency strategy at Brown Brothers Harriman. “It is likely to happen within the context of broad-based EM weakness.”
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