The dollar was broadly stronger on Friday as the market’s focus turned to the possibility of a Fed rate hike before the end of this year, following a more upbeat speech by Fed Chair Janet Yellen on Thursday.
The euro fell back into the 1.11 handle against the dollar, after having approached 1.13 yesterday. Yellen’s comments accelerated a decline to a low of 1.1115 today. The diverging monetary policies between the ECB and the Fed are taking hold and putting the single currency under more pressure.
In the absence of high‐level UK economic releases, the firmer dollar pressured sterling back below 1.52 to slide to 1.5151, the lowest level since early May.
The dollar extended gains against the yen today, with the help of Yellen’s comments and soft inflation data in Japan, and an added boost by US GDP data. The dollar briefly poked the 121.00 yen level to hit a two-week high of 121.22 after the upwardly revised US GDP numbers.
The final reading for US second quarter growth data was revised higher to a 3.9% annual rate, up from the previously reported 3.7% rate. Expectations were for the reading to be unchanged at 3.7%. Helping boost the Q2 growth figure higher was an increase in consumer spending, which accounts for more than two thirds of US economic activity.
Markit’s flash reading of the US services PMI fell in September to 55.6 from August’s 56.1, although it was in line with expectations. The dollar sold off on the news to fall to 120.49. But the greenback’s decline was halted after other data showed the final reading for the University of Michigan consumer sentiment index in September was revised higher to 87.2 from a prior reading of 85.7. It also beat expectations of 86.7.