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Dollar Dips on Soft U.S. Factory Data, BoE Boosts Pound

Dollar dips on soft U.S. factory data, BoE boosts pound

Investing.com - The dollar eased after hitting the highest levels of the year on Thursday following the release of soft U.S. manufacturing data, while the pound was higher after the Bank of England laid the groundwork for an August rate hike.

The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, dipped 0.12% to 94.67 by 09:40 AM ET (13:40 GMT), after rising to an eleven month high of 95.07 earlier.

The dollar softened slightly after a report showing that manufacturing activity in the Philadelphia region slowed in June after a spike higher in the previous month.

At the same time, the Labor Department reported that initial jobless claims fell unexpectedly last week, pointing to further tightening in the labor market.

Demand for the dollar continued to be underpinned after Federal Reserve Chairman Jerome Powell on Wednesday reiterated that the case for gradual rate hikes remains strong.

Sterling was higher, with GBP/USD advancing 0.62% to 1.3255, bouncing back from the seven month trough of 1.3102 reached earlier in the day.

The pound strengthened after the Bank of England left interest rates on hold, but a surprise vote for a rate hike by the bank’s chief economist shifted the balance of probability for the next hike to the August meeting.

The U.S. currency was a touch lower against the yen, with USD/JPY dipping 0.11% to 110.23, off an earlier high of 110.76.

The dollar pared all of the day’s gains against the yen earlier as Italian bond yields spiked after two Eurosceptic lawmakers were named to head key economic committees in the Italian parliament.

The move bolstered the new government's possible future agenda of leaving the euro area.

Meanwhile, the euro erased early losses against the dollar, with EUR/USD rising 0.17% to 1.1596.

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