* U.S. GDP decelerates to 2.1% in Q2, not as slow as expected
* Data does not change Fed expectation for a rate cut next week
* U.S. nixed currency intervention -White House adviser Kudlow
* GRAPHIC-World FX rates in 2019: http://tmsnrt.rs/2egbfVh
(Updates market action, adds analyst comment, graphic)
By Gertrude Chavez-Dreyfuss and Richard Leong
NEW YORK, July 26 (Reuters) - The dollar reached two-month peaks on Friday, as
better-than-expected U.S. growth data did not alter the view the Federal Reserve would
soon lower rates for the first time in a decade.
The dollar's rise was also helped by widening yield differentials between U.S. and
German debt. Spreads were holding at two-month highs at 250.5 basis points.
Investors were disappointed by a lack of policy action from the European Central
Bank at a meeting on Thursday. Their attention will now shift to a Federal Reserve
meeting next week, where policymakers are expected to cut interest rates by 25 basis
points to 2.00%-2.25%.
While U.S. gross domestic product slowed less than what economists polled by
Reuters had forecast, it will likely not diminish the prevalent view among policymakers
that a rate cut is needed to counter risk from trade conflicts and softening global
demand, analysts said.
Data showed U.S. GDP grew at a 2.1% annualized rate in the second quarter, weaker
than the 3.1% pace in the first quarter but stronger than the 1.8% projected by
economists polled by Reuters. "You continue to see this theme that the U.S. is growing well, better than most G7
economies, consistent with dollar strength that we're seeing on the back of this," said
Erik Nelson, currency strategist at Wells Fargo Securities in New York.
"I don't think it changes all that much for the Fed next week. We still expect a 25
basis-point cut at the meeting," he added.
In late U.S. trading, the dollar index .DXY was up 0.2% at 98.009, after earlier
hitting its highest level since late May at 98.088. It gained 0.9% on the week
following a rise of about 0.4% the week before.
Interest rate futures suggested traders positioned for the Fed to lower key
borrowing costs next week, with an 81% chance of a quarter-point cut, CME Group's
FedWatch program showed. FFQ9
"It takes 50 basis-point (cut) off the table," said Marvin Loh, State Street's
global macro strategist, in Boston. "There are enough good things going on in the
economy."
The greenback also received a lift after White House adviser Larry Kudlow told CNBC
television the United States has ruled out intervention in currency markets to counter
other nations from weakening their own currencies to help their exporters. other currencies, the euro EUR= was down 0.17% at $1.11275, recovering from a
two-month low of $1.1112 after the ECB decision on Thursday. For the week, the single
currency fell 0.8%.
After the ECB session, President Mario Draghi indicated the bank was prepared to
cut rates at its next meeting, in September, and consider other options for easing.
Sterling shed 0.53% to $1.2386 after hitting a 27-month low, after European
Commission President Jean-Claude Juncker told Britain's new prime minister, Boris
Johnson, that an agreement reached by his predecessor Theresa May was the best and the
only Brexit deal. Currency bid prices at 2:28PM (1828 GMT)
Description RIC Last U.S. Pct YTD Pct High Bid Low Bid
Close Change Change
Previous
Session
Euro/Dollar EUR= $1.1125 $1.1145 -0.18% -3.00% +1.1150 +1.1113
Dollar/Yen JPY= 108.6900 108.6200 +0.06% -1.42% +108.8200 +108.5700
Euro/Yen EURJPY= 120.95 121.09 -0.12% -4.18% +121.1900 +120.8000
Dollar/Swiss CHF= 0.9940 0.9906 +0.34% +1.28% +0.9946 +0.9901
Sterling/Dollar GBP= 1.2385 1.2454 -0.55% -2.92% +1.2462 +1.2377
Dollar/Canadian CAD= 1.3174 1.3161 +0.10% -3.40% +1.3198 +1.3157
Australian/Doll AUD= 0.6909 0.6950 -0.59% -1.99% +0.6955 +0.6903
ar
Euro/Swiss EURCHF= 1.1062 1.1042 +0.18% -1.71% +1.1063 +1.1038
Euro/Sterling EURGBP= 0.8983 0.8950 +0.37% -0.01% +0.8985 +0.8948
NZ NZD= 0.6632 0.6662 -0.45% -1.27% +0.6669 +0.6627
Dollar/Dollar
Dollar/Norway NOK= 8.7175 8.6725 +0.52% +0.91% +8.7316 +8.6742
Euro/Norway EURNOK= 9.7002 9.6707 +0.31% -2.08% +9.7101 +9.6683
Dollar/Sweden SEK= 9.5011 9.4475 +0.39% +5.99% +9.5101 +9.4453
Euro/Sweden EURSEK= 10.5757 10.5343 +0.39% +3.04% +10.5777 +10.5277
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GRAPHIC-Bets on bold first rate-cut from the Fed https://tmsnrt.rs/2XTkkpn
GRAPHIC-Bets on bold first rate-cut from the Fed interactive https://tmsnrt.rs/2Y3UHTf
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