© Reuters.
Investing.com – The US dollar rose in early European trade on Thursday as negotiations to end the debt ceiling crisis in Washington yielded no agreement and more Fed officials are set to produce.
At 02:55 a.m. ET (06:55 GMT), the dollar, which measures the greenback against a basket of six other currencies, rose 0.1% to 102.845, near a seven-week high.
President Joe Biden and Republican Congressman Kevin McCarthy agreed to directly negotiate raising the government’s debt ceiling of $31.4 trillion, after a months-long standoff.
This increased optimism that a deal could be struck to avoid a devastating debt default, but a cautious atmosphere mitigated the risk.
“Markets are looking at the glass half empty in this situation, as there is likely to be expectations of further meaningful progress toward a deal,” ING analysts said in a note. “We believe there is still room for judgment until we get clearer indications that the two sides have moved closer on the core issues when it comes to debt limit negotiations.”
Traders will also be paying attention to a slew of Federal Reserve speakers this week, most notably the President on Friday, for more signals about monetary policy.
It is widely expected to pause the rate-hiking cycle in June, but Fed officials generally offered a hawkish view on monetary policy this week, citing continued high levels of inflation.
It fell 0.1% to 1.0832, near the previous session’s low of more than six weeks, ahead of a speech by the European Central Bank chief later in the session, although the US debt story remains the main driver.
“1.0800 is likely to be a key reference level to gauge market sentiment on the US debt ceiling story,” ING said. “We could see some good support at 1.0800, and a break down could suggest that the FX market is moving more seriously into price in the event of a US default.”
It decreased by 0.2% to the level of 1.2464 before the release of the Bank of England.
The yen fell 0.1% to 137.50, with the yen bouncing back after heavy losses overnight, while it fell 0.2% to 0.6645, as weaker-than-expected employment data indicated smaller economic margins to continue raising interest rates.
It rose 0.2% to 7.0151, clearing the psychologically important 7 level against the greenback for the first time since early December, as a series of weaker-than-expected economic readings for April indicated a slowing recovery in the country.