The U.S. dollar retained a strengthening posture Friday, after the Federal Reserve kept rates unchanged but signaled that further interest-rate increases were on the horizon.
In response, a popular gauge for the greenback rallied 0.8% in its best daily performance since August, according to FactSet data.
On Friday, the ICE U.S. Dollar Index DXY, +0.09% held on to some slim gains, “remaining bid in the wake of [an] unambiguously hawkish Fed statement,” wrote Boris Schlossberg, managing director of FX strategy at BK Asset Management. The index was up 0.1% at 96.770, having pulled back slightly after rising on the back of better-than-expected producer-price index data.
The Fed Thursday left its key interest rates unchanged at 2%-2.25%, and said further rate increases would continue. The next increase is expected in December—the fourth of the year. Some market participants voiced concerns that the central bank didn’t address October stock-market volatility.
Elsewhere, traders focused on economic data in the U.K., which saw trade balance and manufacturing data beat expectations, while third-quarter gross domestic product slid to 0.6% in the quarter from 0.7% previously, in line with forecasts. The data dump also showed that business investments retreated in the third quarter, which market participants attributed to the uncertainty around the U.K.’s planned exit from out of the European Union.
The British pound GBPUSD, -0.1531% was weaker on the day, sliding to $1.3032 from $1.3061 late Thursday in New York.
“The price action in cable remains dominated by Brexit headlines as the Irish border issue continue to be the single biggest stumbling block to the deal,” said Schlossberg. Cable refers to the sterling-dollar currency pair.
Elsewhere in Europe, the conflict between the European Commission and Italy about the latter’s budget proposal remains in focus. Officials on both sides have been oscillating between affirming they want to reach a deal and reverting to a more obstinate stance. Brussels wants Rome to resubmit its budget proposal, which was deemed in conflict with EU budget rules. Italy’s first proposal saw an increase in government spending that would have pushed its budget deficit up.
The euro EURUSD, -0.1496% last bought $1.1351, down from $1.1365 late Thursday in New York.
In other much anticipated data, China released consumer price and producer-price inflation numbers early on Friday, showing a slight dip to 3.3% in PPI versus the previous month’s read at 3.6%, but stability in CPI at 2.5%.
Friday’s release followed some buoyant trade numbers released on Thursday, although investors warned that the U.S.-China trade spat was distorting the figures, with investments coming ahead of increases in duties.
Read: Why no one is popping champagne over China’s buoyant export data
Against that backdrop, the dollar was slightly stronger versus the yuan in, buying 6.9547 yuan USDCNY, +0.3245% in Beijing, up 0.3%, and 6.9456 yuan USDCNH, +0.1109% in the offshore market, up 0.1% on Thursday.
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