The U.S. dollar edged higher in early European trade Thursday, but remained near a one-month low amid concerns aggressive tightening by the Federal Reserve may already be slowing economic growth. The minutes from the early May Fed meeting, released Wednesday, indicated that the central bank policymakers will be sticking to a plan to raise rates by a half-percentage point at its next two meetings starting next month, largely as expected. The scaling back of Fed tightening bets has followed slowing economic growth, with new home sales falling almost 17% last month and retailers reporting disappointing results as consumers scale back discretionary spending as the prices of essentials like food and petrol soar.
Sterling was flat against the dollar and rose against the euro on Wednesday, having briefly lost ground against both currencies following publication of a report detailing COVID lockdown-breaching parties at the office of Britain's prime minister. A failure of leadership was to blame for a culture that led to the alchohol-fuelled gatherings being held, the report by senior official Sue Gray said. After its conclusions emerged, sterling fell as much as 0.4% against the dollar but by 1432 GMT was flat at $1.2530.
The pound reclaimed some lost ground against a weakening euro on Wednesday, a day after plunging following weak data and ahead of the expected release of a report into lockdown-breaking parties at Downing Street. Senior civil servant Sue Gray is expected to publish the report on Wednesday, heaping more pressure on Prime Minister Boris Johnson as the country struggles with a slowing economy and decades-high inflation. Data on Tuesday showed a sharp slowdown in British business activity in May, with S&P Global's flash Composite Purchasing Managers' Index slumping to a 15-month low, adding to fears that the economy will slip into recession.
The U.S. dollar index hit nearly a one-month low on Tuesday after European Central Bank President Christine Lagarde said euro zone interest rates will likely be in positive territory by the end of the third quarter, giving the euro a boost. Lagarde's comments implied an increase of at least 50 basis points to the ECB deposit rate and fueled speculation of bigger hikes this summer to fight a surge in inflation tied to rising energy prices caused by the war in Ukraine and massive public-sector stimulus after the onset of the coronavirus pandemic. The euro was up 0.42% at $1.07355 at 3:25 p.m. EDT (1925 GMT).
The U.S. dollar index hit a nearly one-month low on Tuesday after European Central Bank President Christine Lagarde said eurozone interest rates will likely be in positive territory by the end of the third quarter, giving the euro a boost. Lagarde's comments implied an increase of at least 50 basis points to the ECB deposit rate and kept speculation alive of bigger rate hikes this summer to fight record-high inflation, partly due to rising energy prices over Russia's war against Ukraine as well as massive public-sector stimulus the pandemic. Over the past seven trading sessions, the single currency has rebounded 3.7% after having fallen to its lowest level since January 2017, at $1.0349, earlier this month.
The Euro has rallied a bit during the trading session on Tuesday to reach the 50 day EMA. That being said, we have pulled back just the bid and it looks as if the market is starting to run out of momentum.
The euro rose to a one-month high on Tuesday after European Central Bank President Christine Lagarde said interest rates in the euro zone will likely be in positive territory by the end of the third quarter. Traders cut short bets on the single currency as Lagarde's comments combined with resilient business activity data boosted appetite for the euro, though gains were capped ahead of the release of minutes from the Federal Reserve's May policy meeting on Wednesday. The euro, which was the stand-out gainer on Monday after Lagarde indicated eight-years of negative euro zone interest rates will most likely be over by the end of summer, extended gains.
Shares slid worldwide on Tuesday as fears about weak earnings and slowing growth punctured the recent mini-rally, while hawkish remarks from European Central Bank Chief Christine Lagarde reminded edgy markets that rate hikes loom. That followed a 1.4% fall in MSCI's broadest index of Asia-Pacific shares outside Japan, while the benchmark STOXX index of European shares fell 1.1%. Italian and Greek bond yields meanwhile touched recent highs after Lagarde said on Tuesday she saw the ECB's deposit rate at zero or "slightly above" by the end of September, implying an increase of at least 50 basis points from its current level.
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