Investing.com – The U.S. dollar rose in early European trade Thursday, continuing the previous session’s positive tone as strong private payrolls data overshadowed Fitch’s downgrade of its U.S. sovereign rating.
At 03:10 ET (07:10 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.2% higher at 102.602, just off a four-week high of 102.82 seen on Wednesday, when the index gained 0.5%.
Dollar boosted by strong labor data
The dollar has been boosted by private data showing that U.S. payrolls grew substantially more than expected in July, raising expectations for the official jobs report, which is due on Friday.
After raising interest rates by a quarter of a percentage point in July, Fed chair Jerome Powell made it clear that the policymakers will be studying economic data for clues of the strength of the U.S. economy before it next meets in September.
A strong labor market will likely result in continued wages pressure, which could prompt the Fed to continue its aggressive monetary tightening cycle.
This enabled traders to shrug off a U.S. credit rating downgrade that cast doubt on the country’s fiscal outlook.
“Expectations that jobs figures will still be robust this week likely prevented any further dovish repricing in the USD curve,” analysts at ING, said in a note.
Sterling edged lower ahead of BOE meeting
GBP/USD traded 0.2% lower at 1.2689, ahead of the Bank of England‘s monetary policy decision later on Thursday, where the central bank is expected to raise interest rates to a 15-year high of 5.25% from 5%.
U.K. inflation fell to 7.9% in June, easing off 8.7% in May, which points to a 25-basis-point hike, instead of a repeat of last month’s 50 bps increase. However, this is still well above the central bank’s 2% medium-term target, which may make the BOE the last of its peer central banks to end its tightening cycle.
Euro slips lower; German economy is struggling
EUR/USD fell 0.2% to 1.0920, after German imports slumped 3.4% in June, indicative of weak domestic demand in the largest economy in the eurozone.
Services PMI data is due through the eurozone, later this session, and should show this sector in expansion, in contrast with the weak manufacturing activity data seen earlier this week.
