Dollar gains for 6th day in a row, amid global growth fears

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February 7, 2019 2:53pm NYSE:UUP

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From Anneken Tappe: The U.S. dollar extended its strengthening trend Thursday, on track for its sixth advance in a row, amid weakness in the euro. Currency traders also awaited speakers from the Federal Reserve as relatively upbeat economic data provided early support for greenbacks.

“Every major currency but the Japanese yen is trading softer versus the dollar thus far today,” wrote Stephen Gallo, European head of FX strategy at BMO. Perhaps the dollar’s five-day rally “has left a lot of frustrated FX investors in its wake; many of them got short post-FOMC and have subsequently been squeezed,” Gallo said.

The ICE U.S. Dollar Index DXY, +0.11%  was up 0.1% at 96.445. The gauge has been positive for six trading days in a row now, according to FactSet data.

Against the yen USDJPY, -0.13% the dollar slipped 0.2% to ¥109.73.

On the data front, the number of people who applied for jobless benefits in early February fell back toward recent postrecession lows after a holiday-related spike pushed them to a 16-month high at the end of last month. Initial jobless claims, a rough way to measure layoffs, declined by 19,000 to a seasonally adjusted 234,000 in the seven days ended Feb. 2, the government said Thursday.

Also on Thursday, Richard Clarida, the Fed’s vice chairman of the board of governors delivered a speech, while St. Louis Fed president James Bullard is still scheduled to speak later on.

In the U.K., the Bank of England left interest rates unchanged, as expected, and warned of waning global growth and Brexit uncertainties weighing on British gross domestic product growth.

“U.K. economic growth slowed in late 2018 and appears to have weakened further in early 2019,” said the BOE statement.

“The accompanying inflation report was perhaps the most of interest – the BOE cut its GDP growth forecast from 1.7% in 2019 to 1.2% and warned the Brexit damage to the economy was increasing with a predicted slump in investment,” said Charles Hepworth, investment director at GAM.

The British pound GBPUSD, +0.2088%  initially extended its losses on the back of the central bank’s monetary policy update and inflation report, dropping to a low of $1.2853, a more than two-week low, but recovered during the subsequent news conference. BOE Gov. Mark Carney sounded slightly more upbeat about the U.K.’s prospects in case of a soft Brexit, which helped the currency strengthen.

Sterling last bought $1.2971, up from $1.2931.

On the note of Brexit, Prime Minister Theresa May told reporters that she was “going to deliver it on time,” meaning by March 29, when the U.K. is officially scheduled to leave the European Union.

Elsewhere in Europe, the euro EURUSD, -0.0880%  was weaker, buying $1.1356 versus $1.1364.

German economic data were weaker-than-expected for a second day in a row, casting a long shadow over the health of the eurozone economy. Meanwhile, the European Commission, the EU’s executive arm, lowered its growth forecast for the eurozone to 1.3% in 2019, compared with 1.9% cited in November.

The Invesco DB US Dollar Index Bullish Fund (UUP) was trading at $25.67 per share on Thursday afternoon, up $0.04 (+0.16%). Year-to-date, UUP has gained 6.82%, versus a 1.24% rise in the benchmark S&P 500 index during the same period.

UUP currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 17 ETFs in the Currency ETFs category.

This article is brought to you courtesy of MarketWatch.

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