The USD index extended losses to more than three-week lows, but the downside potential looks limited
Wall Street stocks extended the ascent overnight even after the latest GDP showed a second-straight contraction. US economic growth fell 0.9% in the second quarter versus the expected gain of 0.3%. The number is telling investors there is no compelling reason for the Fed to deliver another 0.75% rate hike in the coming months, so a less hawkish approach towards the tightening cycle would be positive for stocks. The Dow Jones Industrial Average jumped 1%, the S&P 500 rose 1.2%, and the Nasdaq Composite added nearly 1.1%.
Taking their cue from US markets, Asian equities advanced on Friday, with MSCI’s broadest index of Asia-Pacific shares outside Japan adding 0.41%. The Nikkei 225 in Tokyo finished nearly unchanged. Bucking the overall positive trend, Hong Kong’s Hang Seng index fell around 2.5% as tech stocks came under solid selling pressure. Alibaba dropped 6.7%, suffering losses for the third consecutive day, digesting the report that several Ant Group executives have stepped down as Alibaba partners.
In Europe, stocks opened slightly higher, cheering upbeat economic data. In particular, Spain’s Q2 preliminary GDP came in at +1.1% versus +0.4% q/q expected, Germany’s June import price index arrived at +1.0% versus +0.8% m/m expected, and France’s Q2 preliminary GDP came in at +0.5% versus +0.2% q/q expected. US stock index futures retained positive tone in early premarket trading on Friday, deriving extra support from strong quarterly reports delivered by Apple and Amazon.
The dollar has been struggling for the third day in a row. The USD index extended losses to more than three-week lows, threatening the 105.50 zone ahead of the weekend. A less hawkish tone by the Fed earlier in the week triggered a broad-based sell-off in the greenback. However, the downside potential looks limited so far despite the ongoing correction from multi-year highs seen earlier this month seen above 109.00. As such, EURUSD continues to challenge the 1.0250 region, refraining from a more decisive bounce despite dollar weakness.