Dollar falls for third straight session with Fed eyed

* Dollar falls ahead of Fed meeting

* Germany on cusp of recession, Ifo says

* Fed expected to hike rates 75 bps on Wednesday

By Chuck Mikolajczak

NEW YORK, July 25 (Reuters) - The dollar was lower against a basket of major currencies on Monday, as investors weighed the implications of a rate hike by the U.S. Federal Reserve in an economy that may be on the verge of a recession.

The central bank is widely expected to raise interest rates by 75 basis points at the conclusion of its policy meeting on Wednesday. A hike of that magnitude would effectively close out pandemic-era support for the economy.

Expectations for a hike of 75 basis points from the Fed stand at about 75%, according to CME's Fedwatch Tool Link with a 25% chance of a 100 basis point hike.

Recent data has shown signs of an economic slowdown while inflation remains stubbornly high, with claims for jobless benefits rising to its highest in eight months last week and regional manufacturing gauges slumping.

Later in the week, investors will also eye the advance reading for second-quarter gross domestic product, which could show negative growth and meet a traditional definition of recession. On Friday, personal consumption expenditures, the Fed's preferred inflation measure, will be released.

"Everybody is expecting a 75 percent increase, a recession essentially the day after with a negative GDP so I don’t think you are going to get anything changing right now," said Joseph Trevisani, senior analyst at

"But right now, equities are going nowhere, the dollar has remained strong but has given back, the traders who went long the dollar took some profits which is perfectly normal."

The dollar index =USD fell 0.244% at 106.420, with the euro EUR= up 0.14% to $1.0224.

Last week, the greenback saw its biggest weekly percentage decline in two months, as a rally in equities helped dent the appeal of the safe-haven dollar and a 50 basis point rate hike by the European Central Bank helped buoy the euro to a two-week high.

On Monday, Latvian central bank Governor Martins Kazaks said in an interview with Bloomberg News that the ECB may not be done with big rate hikes.

U.S. equities gave up early gains with a slew of corporate earnings on deck for the week, including those from mega-cap names such as Apple AAPL.O , Microsoft <>MSFT.O> and Amazon <>AMZN.O>. Investors are eyeing the earnings season for signs of a slowdown in the economy as well as the impact of a strong dollar on profits.

Of the 107 companies in the S&P 500 .SPX that have reported earnings through Monday morning, 74.8% have topped analyst expectations, below the 81% beat rate over the past four quarters, but above the 66% rate since 1994, per Refinitiv data. Earnings growth is currently estimated to be 6.1%, up from 5.6% at the start of July.

The Ifo business sentiment survey showed on Monday that business morale in Germany fell more than expected in July to its lowest in more than two years.

The Japanese yen JPY= weakened 0.44% versus the greenback at 136.65 per dollar, while Sterling GBP= was last trading at $1.2047, up 0.37% on the day.

British industrial output grew at the slowest pace in over a year in the three months to July, but there are tentative signs that some challenges around inflation and investment are easing, a Confederation of British Industry survey showed on Monday.

In cryptocurrencies, bitcoin BTC= last fell 4.05% to $21,687.61.

World FX rates Link

Reporting by Chuck Mikolajczak, editing by Ed Osmond and
Marguerita Choy

Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.

All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.

Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.

We are using cookies to give you the best experience on our website. Read more or change your cookie settings.

Risk Warning: Your capital is at risk. Leveraged products may not be suitable for everyone. Please consider our Risk Disclosure.