The euro gained against the dollar on Friday as the greenback headed for its first weekly fall in more than a month. Fading expectations for a Federal Reserve rate hike and concerns from an AI-driven equity selloff weighed on the dollar.
The euro rose 0.33% to $1.1255 on Friday, putting it on track for a 0.48% weekly gain. The dollar weakened against the euro and the yen, heading for its first weekly fall in more than a month.
Fed officials signal no urgency to tighten
Hotter-than-expected consumer and producer price readings initially rattled markets this week. However, comments from Fed officials signaling no urgency to tighten policy helped stabilize Treasury yields and eroded support for the dollar.
Markets now assign an 85% probability to the Fed keeping rates unchanged later this month, the CME FedWatch Tool shows. John Velis, Americas macro strategist at BNY, said he does not think there is enough support in the committee for a rate hike in October, and that December remains an unanswered question.
AI worries compete with interest rates
AI stocks fell sharply this week, and the stress spread to parts of the credit market. Investors worry that data centre operators might not manage to be profitable in time to pay their debts.
According to Marc Chandler of Bannockburn Capital Markets, interest rates have driven the dollar since mid-June: "now it looks like concerns about the sustainability of AI is offsetting that".
Euro, sterling and franc gain
The euro's move followed a 0.56% climb on Thursday, its biggest daily rise in two months. Fiscal risks in France remained in the background after the jump in the French debt risk premium in early October.
The dollar index, which measures the currency against six major peers, fell 0.42% to 101.61 and was set for a 0.6% weekly drop. Sterling rose 0.60% to $1.3353, up 0.92% on the week.
The dollar fell 0.48% against the Swiss franc to 0.8228, leaving it down 0.92% for the week. The franc was buoyed this week by safe-haven demand. Against the yen, the dollar weakened 0.12% to 157.79 on Friday.
Source: Investing.com
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