Dollar struggles after weak US ISM data

Last Friday, the Dollar struggled near a 2-1/2-year low against the Euro and a seven-week trough versus the Yen. The greenback has been on the back foot through the week, weighed by largely uninspiring US economic data which have added to uncertainty about the pace of future Federal Reserve policy tightening and political turmoil gripping Washington.

The market received a fresh dose of both factors overnight. Data from the US Institute of Supply Management (ISM) showed its non-manufacturing index fell more than expected, while it was reported that a grand jury will investigate allegations of Russian meddling in the US election. The stressed Dollar bulls are looking to the US jobs report due at 3:30 pm for potential relief.

Last Thursday, Britain’s Pound skidded almost 1% to a nine-month low against the Euro, after the BoE voted 6-2 to keep interest rates at their record lows and lowered its forecasts for growth, inflation and wages. BoE Governor Mark Carney and his top officials reiterated that they might raise borrowing costs more than investors expect over the next three years, possibly within a year.

However, markets focused on the Bank’s lowering of its 2017 growth forecasts, to 1.7% from 1.9% in May, as well as its unexpected reduction of its inflation projections.

Meanwhile, the Russian Rouble rebounded after a weak start, as the market’s focus switched away from new US sanctions against Moscow to rising Oil prices. Tensions with the United States have weighed on the Rouble in recent trade as Russian Prime Minister Dmitry Medvedev said last Wednesday that new US sanctions amounted to a “full-scale trade war.