Connect with us
  • tg

Forex

Dollar at 2-week high, euro softer as market bets on rate cuts

letizo News

Published

on

Dollar at 2-week high, euro softer as market bets on rate cuts
© Reuters. U.S. Dollar banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

By Hannah Lang

WASHINGTON (Reuters) -The U.S. dollar was at a two-week high on Wednesday, while the euro was weak across the board as markets ramped up bets that the European Central Bank (ECB) will cut interest rates as early as March.

Although markets are still pricing at least 125 basis points of interest rate cuts from the U.S. Federal Reserve next year, the dollar was able to hold steady as rate cut bets for other central banks intensified.

The , which measures the currency against six other majors, was last up 0.19% at 104.16. The euro was down 0.29% to $1.0764.

Traders are betting that there is around an 85% chance that the ECB cuts interest rates at the March meeting, with almost 150 basis points worth of cuts priced by the end of next year. Influential ECB policymaker Isabel Schnabel on Tuesday told Reuters that further interest rate hikes could be taken off the table given a “remarkable” fall in inflation.

The euro also touched a three-month low against the pound, a five-week low versus the yen and a 6-1/2 week low against the Swiss franc.

“It’s a reasonably sized sell-off and the market is trying to digest, is it just a correction? Did the market get over-exuberant in the previous weeks? I think there is definitely an element of that,” said Amo Sahota, director at FX consulting firm Klarity FX in San Francisco.

‘A BIT OVERBOARD’

The ECB will set interest rates on Thursday next week and is all but certain to leave them at the current record high of 4%. The Fed and Bank of England are also likely to hold rates steady next Wednesday and Thursday respectively.

The Bank of Canada on Wednesday held its key overnight rate at 5% and, in contrast to its peers, left the door open to another hike, saying it was still concerned about inflation.

Traders have priced around a 60% chance of the U.S. central bank cutting rates in March, according to CME’s FedWatch tool.

“Markets have aggressively priced in rate cuts, without any kind of confirmation from central banks,” said Adam Button, chief currency analyst at ForexLive in Toronto. “As December continues, we need either a change in tune from central bankers or a repricing in markets.”

If the Fed were to cut rates as markets expect, it could result in the dollar loosening its grip on other G10 currencies next year, dimming the outlook for the greenback, according to a Reuters poll of foreign exchange strategists.

The spotlight in Asia was on China, as markets grappled with rating agency Moody’s (NYSE:) cut to the Asian giant’s credit outlook.

The offshore was flat at $7.1728 per dollar, a day after Moody’s cut China’s credit outlook to “negative”.

China’s major state-owned banks stepped up U.S. dollar selling forcefully after the Moody’s statement on Tuesday, and they continued to sell the greenback on Wednesday morning, Reuters reported.

Elsewhere in Asia, the Japanese yen weakened 0.15% versus the greenback at 147.38 per dollar. The Australian dollar fell 0.02% to $0.65495.

In cryptocurrencies, bitcoin eased 0.06% to $44,049, still near its highest since April 2022.

The world’s largest cryptocurrency has gained 150% this year, fueled in part by optimism that a U.S. regulator will soon approve exchange-traded spot bitcoin funds (ETFs).

Forex

Dollar firms, euro slips ahead of key inflation data

letizo News

Published

on

Dollar firms, euro slips ahead of key inflation data
© Reuters

Investing.com – The U.S. dollar firmed in early European trade Wednesday, shrugging off signs of U.S. economic weakness ahead of the release of this week’s key inflation data as traders look for clues as to when the Federal Reserve will start cutting interest rates.

At 04:00 ET (09:00 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.3% higher at 104.080. 

U.S. inflation to prove sticky?

Data released on Tuesday showed that orders for U.S. fell a hefty 6.1% last month, while the Conference Board’s was revised lower for January and declined further in February. 

However, these signs of economic weakness have had little impact on the U.S. currency with all eyes on the , the Fed’s favorite inflation gauge, due on Thursday. 

Economists are expecting a 0.4% increase for January after 0.2% in the previous month. A stickier-than-expected reading could prompt the Fed to delay rate cuts further.

“We remain of the view that evidence of resilient inflation in the Fed’s preferred measure of inflation will offer more support to the dollar into the end of the week,” said analysts at ING, in a note.

Markets have largely priced out a rate cut at both the Fed’s March and May meeting, and the chance of a cut in June is seen as largely 50:50.

Before the PCE data, a second reading on fourth-quarter is due later on Wednesday, while there are more Fed officials due to speak, including , and .

Euro edges lower ahead of eurozone CPI

In Europe, traded 0.2% lower at 1.0818, with Europe also looking forward to its own slew of inflation reports, with Germany, France and Spain scheduled to release price data on Thursday ahead of the on Friday.

Economists are expecting an annual reading of 2.5% for February, dropping from 2.8% in January.

Still, the dollar trade continues to dominate, and this inflation release will have to provide a major surprise to influence the pair substantially.

“EUR/USD continues to follow the dollar dynamics without showing any material impact from eurozone-specific drivers. The pair looks likely to test 1.0800 in the coming days, in our view,” ING added. 

traded 0.4% lower at 1.2635, with sterling hit by a stronger dollar and after recent data showed U.K. grocery prices rising at their lowest rate since March 2022.

Kiwi dollar slumps after RBNZ meeting

In Asia, fell 1.1% to 0.6103, near a two-week low, after the held interest rates steady at 5.5%, but flagged more progress in inflation moving towards its 1% to 3% annual target. 

While the bank still signaled that it will keep interest rates higher for longer in the near-term, its comments saw traders largely price out expectations of any more rate hikes.

traded 0.2% higher to 150.80, with the yen weakening further beyond the 150 level, although steeper losses were limited by the prospect of early interest rate hikes and government intervention.

traded largely unchanged at 7.1993, as traders awaited the release of key for February, due this Friday. 

 

 

Continue Reading

Forex

Dollar slips vs yen after Japan inflation data, US durable goods

letizo News

Published

on

Dollar slips vs yen after Japan inflation data, US durable goods
© Reuters. FILE PHOTO: U.S. Dollar banknote is seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

By Caroline Valetkevitch

NEW YORK (Reuters) -The dollar eased against the Japanese yen on Tuesday after data showed Japan’s core consumer inflation exceeded forecasts while U.S. durable goods orders fell more than expected in January.

Overnight data out of Japan kept alive some expectations that the Bank of Japan might end negative interest rates by April.

In the U.S., the Commerce Department’s Census Bureau said orders for durable goods, items ranging from toasters to aircraft meant to last three years or more, tumbled 6.1% last month, exceeding the 4.5% decline forecast by economists polled by Reuters.

Markets have recently pulled back expectations on the timing and size of Federal Reserve rate cuts this year as the U.S. economy remains strong and inflation pressures stubborn.

Against the yen, the dollar dipped 0.1% to 150.56, while the , which measures the currency against a basket of peers, was last up 0.08% at 103.86.

“Inflation numbers have been drifting a bit lower in Japan over the past few months, but today’s numbers did suggest inflation is sticky even in Japan,” said Shaun Osborne, chief currency strategist at Scotiabank in Toronto.

“It probably does mean we’ll get a mild series of rate increases in Japan in the next few months.”

hit a two-year high on signs large players were buying the cryptocurrency.

Bitcoin was last up 5.22% at $57,513, while ether rose 2.26% at $3,258.

In other U.S. economic news, the consumer confidence index slipped to 106.7 this month – short of forecasts – from a downwardly revised 110.9 in January.

The U.S. core personal consumption expenditures (PCE) price index, due on Thursday, is expected to be one of the more important reports of the week for the market. Forecasts are for a rise of 0.4%.

“We’re waiting for the PCE data to give us a stronger sense of direction perhaps,” Osborne said. “I think we’re prepped for slightly stronger numbers; it probably at this point would have to be a big upside surprise to really get the dollar strengthening.”

The euro was last down 0.1% versus the greenback. It has been rising since mid-February, when it hit its lowest since Nov. 14.

Analysts said the single currency strengthened as markets scaled back bets on future European Central Bank rate cuts to 90 bps by year-end, amid encouraging signals from the economy, which supports expectations for a pick-up in growth in the second half of 2024.

German states, France and Spain will release inflation data on Thursday ahead of the euro area’s figures due on Friday.

ECB officials have sounded more cautious about a quick easing of monetary policy, with President Christine Lagarde saying wage growth remains robust, while ECB dove Yannis Stournaras ruled out a rate cut before June.

The dollar strengthened 0.06% at 7.214 versus the offshore . The People’s Bank of China set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.1057 per dollar.

The weakened 0.06% versus the greenback at $0.617, with traders gearing up for what could turn out to be a significant policy meeting by the Reserve Bank of New Zealand (RBNZ) on Wednesday.

Markets are pricing in a one-in-three chance the RBNZ will raise its 5.5% official cash rate to combat stubborn inflation.

Continue Reading

Forex

Dollar firmer before key inflation data, kiwi sinks as RBNZ holds rates

letizo News

Published

on

Dollar firmer before key inflation data, kiwi sinks as RBNZ holds rates
© Reuters. FILE PHOTO: U.S. dollar banknotes are seen in this illustration taken March 10, 2023. REUTERS/Dado Ruvic/Illustration/File Photo

By Samuel Indyk and Brigid Riley

LONDON (Reuters) -The dollar firmed up on Wednesday as markets awaited a raft of global inflation data for clues on when central banks may start easing policy, while the New Zealand dollar tumbled after its central bank trimmed its forecast for a peak in rates.

The was also hanging at its lowest in over a week after inflation data came in softer than expected, reinforcing expectations that domestic interest rates are unlikely to increase further.

The data calendar looks light on Wednesday so analysts said markets were likely to focus on consumer inflation data from the U.S., Germany, France and Spain on Thursday ahead of euro area figures due on Friday.

“There’s more chance of disinflation ongoing in the euro area, which perhaps could open the door for an earlier cut from the European Central Bank,” said Danske Bank FX and rates strategist Mohamad Al-Saraf.

“We think if inflation is stickier in the U.S. than it is in the euro area then the dollar has to be strong.”

Higher-than-forecast inflation in the U.S. has prompted markets to trim bets on the number of rate cuts expected from the Federal Reserve this year, while the chance of a cut in June now stands at around 60%. At the start of the year, markets were almost fully pricing a rate cut in March.

That repricing has pushed the U.S. currency higher in 2024, including against the euro. The single currency was last down 0.3% against the dollar at $1.0815.

The , which measures the currency against six others including the euro, was last up 0.2% at 104.07, having risen 2.7% year-to-date.

With market expectations more closely aligned with the Fed’s latest projections and comments, traders would only respond if they see a trend break in tier one data, especially anything “hinting at growth weakness,” said Charu Chanana, head of currency strategy at Saxo.

New Zealand’s central bank held the cash rate steady at 5.5%, catching markets by surprise as policymakers said the risks to the inflation outlook have become more balanced.

The RBNZ also trimmed its forecast cash rate peak to 5.6% from a previous projection of 5.7%.

“With a cash rate at 5.5%, the 10 basis points of wriggle room is simply there to remind us that they’ll hike if they need to but the bias is that they probably won’t,” said Matt Simpson, senior market analyst at City Index.

The slid over 1% to its lowest since Feb. 16 at $0.6093 in response.

The Australian dollar also fell after data showed inflation at an annual pace of 3.4% in January, unchanged from December and under market forecasts of 3.6%.

Although inflation remains above the Reserve Bank of Australia’s (RBA) 2-3% target, “it is close enough to expect the RBA to hold rates steady,” said Simpson.

The Aussie was last down 0.6% at $0.6502.

Elsewhere, sterling weakened to $1.2657, down 0.2%, while the yen slipped 0.1% versus the greenback to 150.595.

“We’ve seen in the past when dollar-yen trades above 150 that authorities start to give increased attention to the currency,” Danske Bank’s Al-Saraf said.

“But I would say right now there’s probably not intervention risk unless we see a sharp move in the yen again.”

In cryptocurrencies, bitcoin was last up over 4% at $59,200, extending to its highest level since November 2021.

Ether rose 2% to $3,320.

Continue Reading

Trending

©2021-2024 Letizo All Rights Reserved