Investing.com - The U.S. dollar eased against its major counterparts on Friday, amid fading expectations of a Federal Reserve rate hike in the next couple of months and as markets continued to evaluate the consequences of the Brexit vote.
The dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, fell to 95.48 at one point Friday, the lowest since June 24. It ended the week at 95.72, down 0.25% for the day.
Market players all but ruled out further rate hikes by the Fed this year in the aftermath of Britain’s vote to leave the European Union. In fact, futures markets are now reflecting a chance that the Fed could actually cut interest rates before the end of the year.
According to the CME Fed Watch tool, there’s currently a 0% probability of a Fed rate hike in July and a 3% probability of a rate cut.
The dollar slumped 0.7% against the yen as weak economic data from China and the fallout from the U.K.’s vote to leave the EU boosted safe-haven demand.
The Caixin China manufacturing purchasing managers’ index fell to 48.6 in June, below expectations for 49.1, while the official manufacturing PMI came in at 50.0 last month, in line with expectations.
The disappointing data added to expectations that Beijing will have to roll out more stimulus soon to boost the sluggish economy.
Meanwhile, GBP/USD slid 0.33% to 1.3266, remaining close to a 31-year low of 1.3122, as investors continued to digest the political and economic aftermath of the U.K.’s decision to leave the European Union.
London mayor Boris Johnson abruptly pulled out of the race to become Britain's next prime minister on Thursday, while Britain’s Justice Secretary Michael Gove, one of the main campaigners to take Britain out of the EU, said he would run to become prime minister. Interior Minister Theresa May, who campaigned to remain in the EU, also announced her candidacy to lead the party.
Bank of England Governor, Mark Carney indicated on Thursday that more stimulus may be needed over the summer, sparking expectations for an upcoming rate cut.
Elsewhere, the euro rose after a Reuters report said the European Central Bank was not considering buying government debt out of proportion to euro zone countries' shareholding in the bank. The single currency had fallen sharply on Thursday on a Bloomberg report that the ECB had been considering giving up the capital key due to a shortage of German paper.
In the week ahead, market players will be shifting their attention slightly away from Brexit-related headlines and more towards economic fundamentals and U.S. monetary policy, with the June nonfarm payrolls report and FOMC meeting minutes in the spotlight. There is also ISM services data on Wednesday.
U.S. financial markets will be closed on Monday for the Independence Day holiday.
Elsewhere, in the U.K., market players will be eyeing the release of the Bank of England’s financial stability report for fresh clarity on the health of the U.K. banking sector in wake of Britain’s shock decision to leave the European Union.
Ahead of the coming week, Investing.com has compiled a list of significant events likely to affect the markets.
Monday, July 4
The U.K. is to release data on construction activity.
U.S. financial markets will be closed for the Independence Day holiday.
Tuesday, July 5
China is to publish the Caixin service sector index.
The Reserve Bank of Australia will publish its interest rate decision.
The U.K. is to release data on service sector activity, while the Bank of England will publish its financial stability report. BoE Governor Mark Carney will hold a press conference shortly after the release of the report.
The U.S. is to produce data on factory orders, while New York Fed President William Dudley will speak at an event in New York.
Wednesday, July 6
The U.S. is to release data on the trade balance, while the ISM will publish its non-manufacturing index. Later in the day, the Fed is to produce the minutes of its June meeting.
Thursday, July 7
Bank of Japan Governor Haruhiko Kuroda will speak at an event in Tokyo.
The European Central Bank is to publish the minutes of its June meeting.
The U.S. is to release the monthly ADP nonfarm payrolls report as well as weekly data on initial jobless claims.
Friday, July 8
The U.S. is to round up the week with the closely watched nonfarm payrolls report.