MW: Dollar consolidates; jobs data boost British pound
By William L. Watts, MarketWatch
LONDON (MarketWatch) - The U.S. dollar consolidated against major rivals Wednesday, although the British pound extended gains to hit a two-month high versus the greenback as data showed the U.K. labor market improving further.
The dollar index (DXY 83.60, -0.04, -0.05%) , which tracks the U.S. unit against a basket of six major currencies, traded at 83.576, up from 83.564 in late North American trading on Tuesday. Read more Market Watch Currencies coverage.
The British pound (CUR_GBPUSD 1.5227, +0.0046, +0.3030%) changed hands at $1.5238 versus the dollar, up from $1.5169 on Tuesday, and traded as high as $1.5290 after the Office for National Statistics said the number of British workers claiming jobless benefits fell by 20,800 in May.
A broader jobless measure showed the unemployment rate fell to 7.8% in the three months ending in May, down from 7.9% in the previous three months. Read about British labor data.
Although economists warned that employment growth and the economy could suffer later in the year as the new government's planned austerity budget measures take effect, the data could bolster arguments for a rate hike by the Bank of England, said Boris Schlossberg, director of currency research at GFT.
"We remain skeptical that the U.K. economy will maintain this pace of growth into the second half of the year given the austerity measures to be enacted, but for now the path of least resistance is clearly up and the pair could target $1.5500 over the medium term if U.S. equities continue to rise," Schlossberg said. He referred to the pound's tendency to rally in concert with equities.
Investors will pay close heed to U.S. retail-sales data for June, set for release at 8:30 a.m. Eastern. Economists surveyed by MarketWatch expect a 0.4% decline after a 1.2% drop in May. Read Economic Preview.
The euro (CUR_EURUSD 1.2701, -0.0022, -0.1729%) advanced versus the dollar to buy $1.2704, up a shade from $1.2693 Tuesday after struggling to hold above the $1.2700 level.
A weaker-than-expected 0.9% monthly rise in May euro-zone industrial production helped cap the single currency's gains, Schlossberg said.
Economists had forecast a 1.3% monthly gain. The scale of the increase leaves production on track for a strong quarterly gain of around 2.5%, economists said, which should allow gross domestic product data to show that growth picked up speed in the second quarter. Read about euro-zone industrial output.
The dollar rallied versus the yen as Asian equities advanced, then later trimmed its gain.The dollar traded at ¥88.62, down from ¥88.85 late Tuesday.
"The dollar and yen maintained an easier tone as the market remained in risk-seeking territory following strong equity market gains," said currency analysts at Action Economics.
