As Rishi Sunak gets ready to become the new prime minister of Britain, people’s feelings about risk went up and the U.S. dollar stabilized at lower levels in early European trading on Tuesday.
The Dollar Index, which tracks the dollar against a basket of six other currencies, rose to 111.980 at 02:55 ET (06:55 GMT), near Friday’s low of 111.70, the weakest since Oct. 6.
The October S&P Global Composite PMI showed U.S. business activity falling for a fourth month, indicating that the Fed’s relentless monetary tightening was having an impact. The dollar fell on Monday.
This made it seem like the central bank was rethinking rate hikes after the 75 basis point increase planned for November.
Sources who know what the Fed is thinking say that rate hikes after the one in November would be less noticeable.
GBP/USD increased 0.1% to 1.1286 after Rishi Sunak overcame Boris Johnson and Penny Mordaunt to become Britain’s next leader.
With high inflation pressuring government finances and the Bank of England projecting a recession by year’s end, Sunak’s inbox is full.
However, his strong opposition to outgoing Prime Minister Liz Truss’s massive unfunded tax cuts gives him market credibility. He and his chancellor may agree to tax increases and politically achievable spending reductions to extend this.
Before the latest German business confidence report, EUR/USD fell 0.2% to 0.9856.
The Ifo business climate indicator fell from 84.3 in October to 83.3 in November because of high energy prices.
USD/JPY rose to 148.99, with traders on intervention watch after alleged Bank of Japan intervention on Friday and Monday.
ING analysts wrote. “The BoJ meets to decide monetary policy this Friday and unless we see a shift in its ultra-dovish perspective (a negative policy rate and ongoing quantitative easing), it seems hard to predict a top in USD/JPY anytime soon,” ING analysts wrote.
AUD/USD rose 0.3% to 0.6328, NZD/USD rose 0.3% to 0.5708, helped by rising risk sentiment, and USD/CNY rose 0.6% to 7.3070, with the yuan falling to its weakest level in nearly 15 years on concerns that the country’s new political leadership could jeopardize economic growth with anti-business policies.
