Dollar buoyant, equities cautious ahead of China data

The dollar hovered close to an 11-week high versus major peers on Friday after robust U.S. economic data allowed for a more patient path of Federal Reserve easing.

Asian stocks were mixed, with Japan’s Nikkei rallying amid a weaker yen, while other markets looked ahead cautiously to a barrage of top-tier Chinese economic data later in the day.

The U.S. currency was also buoyed by recent market contemplation of a potential election victory for Donald Trump, whose proposed tariffs and immigration policies are seen as inflationary. That also supported gold, which held close to the record high reached overnight.

The dollar index, which measures the currency against six rivals including the euro and yen, held steady at 103.78 after climbing to 103.87 on Thursday for the first time since Aug. 2.

Overnight, data showed U.S. retail sales rose a stronger-than-expected 0.4% last month after an unrevised 0.1% gain in August. A separate report showed initial jobless claims dropped by 19,000 to a seasonally adjusted 241,000 last week.

Traders now have 74% odds of 50 basis points of interest-rate cuts over the Fed’s remaining two meetings this year, down from 85.6% odds a day earlier, according to CME Group’s (NASDAQ:CME) FedWatch Tool.

“Robust retail sales data provided the Federal Reserve with greater flexibility in its rate path,” said James Kniveton, senior corporate FX dealer at Convera.com.

“Unlike the euro zone, the Fed does not need to adjust policy to support the economy.”

The European Central Bank cut rates by a quarter point on Thursday, as expected, and four sources close to the matter told Reuters that policymakers were likely to cut again in December.

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The euro was flat at $1.08315 after dipping to $1.0811 in the previous session, the lowest since Aug. 2.

The dollar eased 0.15% to 150.02 yen, after jumping to 150.32 yen overnight, piercing the psychological 150 barrier for the first time since Aug. 1.

Democratic presidential candidate Kamala Harris’ edge over Republican Donald Trump has narrowed from a late September lead of seven points to just three, Reuters/Ipsos polling shows. And the rivals are statistically tied in the seven crucial battleground states that will decide the race.

“The USD (is) well-positioned to extend its rally as it continues to price in a Donald Trump election victory,” said Tony Sycamore, an analyst at IG.

Weakness in the yen helped lift Japanese stocks on Friday, with the Nikkei gaining 0.4%.

Equities around the rest of the region were weak though: Australia’s benchmark sagged 0.7% and South Korea’s KOSPI edged 0.05% lower.

Mainland Chinese and Hong Kong markets had yet to open.

Chinese growth and activity data is due at 0200 GMT, and is likely to show a slowdown that puts this year’s economic growth target of around 5% at risk.

Beijing unveiled the biggest stimulus since the pandemic late last month, but investors have been frustrated by the lack of details offered by Chinese authorities in subsequent briefings.

Gold was steady at $2,693.02 per ounce, sticking close to the record $2,696.59 from overnight.

Crude oil futures inched higher on Friday, supported by a surprise drop in U.S. oil inventories and simmering Middle East tensions, but prices were headed for their biggest weekly loss in more than a month on worries of lower demand.

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Brent crude futures rose 16 cents, or 0.2%, to $74.61 a barrel, while U.S. West Texas Intermediate crude was at $70.84 a barrel, up 17 cents, or 0.2%.