The dollar index (DXY) fell by 0.32% on Friday, pressured by a more than 2% drop in WTI crude oil prices and stronger-than-expected U.S. economic data. U.S. August capital goods new orders increased by 1.6% month-over-month, surpassing expectations of 0.6%, while the University of Michigan’s September consumer sentiment index was revised upward to 48.1 from an anticipated drop to 47.5. Markets are currently pricing in a 64% chance of a 25 basis point Fed rate hike at the upcoming FOMC meeting on October 27-28.
In Europe, the euro rose by 0.16% against the dollar, with the fall in crude oil prices easing inflation concerns for the Eurozone. However, the German GfK consumer confidence index fell to a five-month low of -30.6, worse than the forecast of -27.2. There is currently a 42% chance of a 25 basis point ECB rate hike on October 29.
Meanwhile, the Japanese yen strengthened by 1.07% following comments from Japanese officials about addressing the undervalued currency. Strong support from Japan’s Finance Minister, as well as a significant drop in crude oil prices and a rise in the 10-year JGB bond yield to 3.125%, bolstered yen stability. Markets are anticipating a 31% likelihood of a 25 basis point BOJ rate hike at its next meeting on October 30.
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