Most Currencies Slip After Firm GDP Lifts Dollar; Fed In Focus


The dollar index edged up and touched its highest since late May as markets counted down to a likely cut in USA interest rates this week, with much riding on whether the Federal Reserve signals more cuts will follow.

Building expectations that the European Central Bank may turn out to be more aggressive than the Fed in easing monetary policy contributed to euro falls.The pound was the biggest mover in the foreign exchange market, plunging to a new 28-month low of $1.2120 in Asian trading on growing concerns that Britain could crash out of the European Union without a transition agreement on October 31.Sterling was last down 0.3% at $1.2183.

"We remain cautiously optimistic that both sides can agree on a narrow agreement that addresses important trade-related issues, such as United States demands to increase exports", said analysts at Barclays in a note.

"It is just the ongoing hardening of the Brexit line", said Saxo bank's head of FX strategy John Hardy.

The PCE chain price index advanced 2.3 percent (1.4 percent y/y) after rising 0.4 percent in Q1.

The dollar bought 108.60 Japanese yen, lower than 108.80 Japanese yen of the previous session. A Fed cut could extend the euro's broader move lower.

Inc and Facebook Inc weighed heaviest on the S&P 500 and the Nasdaq, which both closed lower.

Pfizer shares slid 3.8% following news of the deal, and after the company lowered its full-year profit and revenue forecasts in an earlier-than-expected release of its quarterly results. The Nasdaq Composite Index lost 52.51 points, or 0.63 percent, to 8,277.70.

MSCI's gauge of stocks across the globe shed 0.16% and emerging market stocks lost 0.28%. Deal-making and a rally in defensive sectors pushed the pan-European STOXX 600 index up 0.3%.

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Data out of the United States on Friday showed that the country's gross domestic product (GDP) expanded by 2.5 percent in 2018, not at a rate above 3 percent as President Trump originally claimed. The report highlighted that USA economic growth slowed in the second quarter of 2019, growing at a rate of only 2.1 percent, compared to the growth of 3.1 percent that was achieved in the first quarter of the year.

U.S. and Chinese trade negotiators also meet in Shanghai this week for their first in-person talks since a G20 truce last month, but expectations are low for a breakthrough.

Oil futures zigzagged in and out of positive territory, whipsawed by Fed expectations and the reaction to talks between Iran and some signatories of its nuclear agreement over the weekend.

USA crude rose 2.57% to $58.33 per barrel and Brent was last at $64.97, up 1.98% on the day.

The Fed is widely expected to cut interest rates for the first time in more than a decade in its July 30-31 meeting, a move broadly seen as a pre-emptive one to protect the economy from global uncertainties and trade pressures.

"People say the Fed could go 50 basis points, but I think that's not going to happen", said Stan Shipley, fixed income strategist at Evercore ISI in NY. "The question is what they are going to say about future cuts".

Benchmark 10-year notes last rose 9/32 in price to yield 2.0511%, from 2.081% late on Friday.

Spot gold added 0.3 percent to $1,430.39 an ounce.

Oil prices drifted down in early trade pressured by the usual concerns about over supply and slowing world demand.