GBP/USD Regains Momentum as Dollar Rally Falters


Investing.com – The dollar traded modestly higher against a basket of major currencies amid mixed US economic data which failed to offset losses following an uptick in the loonie and sterling.

The , which measures the greenback’s strength against a trade-weighted basket of six major currencies, rose 0.14% to 90.36.

U.S. industrial production increased more than expected in December buoyed by strong gains in mining production, but manufacturing output fell short of expectations amid the recent cold snap across the U.S.

surged 0.9% in December last month, beating expectations for a 0.4% rise, while rose just 0.1% in December, falling short of expectations for a 0.3% rise.

A rise in against the dollar to $1.3835, the highest level since the EU referendum vote, weighed on the greenback but losses were limited by a slump in the euro.

fell 0.20% to $1.2236 as European Central Bank (ECB) officials attempted to quash investor expectations that the central bank would announce plans to unwind its massive stimulus programme at next week’s meeting.

ECB’s Vitor Constancio reportedly said changes to central bank’s forward guidance “would not be immediate” as inflation remained below target, while the ECB’s Ewald Nowotny said the euro exchange rate “must be observed”.

As was widely expected, the Bank of Canada raised its overnight rate , while citing the need for ongoing ‘accommodation’ to ensure inflation remained on target.

Market participants viewed the central bank’s accompanying monetary policy statement as “dovish,” noting that the central bank may not raise rates as fast as markets had anticipated, which could weigh on the loonie.

“Overall, this was a dovish statement relative to the minimum degree of optimism needed to justify a rate hike Wednesday, and could put some downward pressure on two-year yields and the value of the Canadian dollar,” said Avery Shenfeld at CIBC Economics.

rose fell 0.23% to C$1.2405, while gained 0.30% to Y110.79.

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