© Reuters.
Investing.com – The US dollar fell in early European trade on Thursday, but remained near a recent two-month high as traders anticipate the US Federal Reserve’s policy-setting meeting next week.
At 03:15 EST (07:15 GMT), the greenback, which measures the greenback against a basket of six other currencies, was trading down 0.1% at 104.002, just below the two-month peak of 104.70 seen last week. .
Another hike by the Fed?
It is widely expected to halt the one-year rate hike cycle next week, and speculation is growing that this may be a temporary situation and that another rate hike remains a distinct possibility this year, possibly in July.
This growing expectation that US interest rates could rise further came on the back of surprise rate hikes by last week, with both central banks bemoaning the sticky nature of their inflation.
The Fed will see the latest news before they make their decision on interest rates, and any move higher from the annual figure of 4.9% in May is likely to fuel another hike.
“The US economy continues to surprise to the upside, while Europe and China were weaker than expected… This pattern must reverse before a shallow decline in the dollar’s value in the medium term returns to view,” Goldman Sachs said in a note. .
ECB officials remain hawkish
It rose 0.1% to 1.0711, with officials continuing to paint a hawkish picture on future interest rates as they try to tame high levels.
Dutch central bank chief Claes Nott was the latest to signal further tightening, saying on Wednesday that he was “not yet convinced that the current tightening is sufficient,” adding, “Inflation may remain too high for a long time and interest rates will continue to rise thereafter if necessary.”
However, recent economic data indicated a region still struggling to recover from difficulties stemming from last year’s energy price hike.
The latest iteration is expected to show that the region stagnated in the first three months of this year, and only grew.
Unemployment data may affect the British pound
It rose 0.1% to 1.2452, and trades in a narrow range as traders await next week’s wage data.
“We see this as a negative event for GBP, as wage growth could continue to slow and remove some strength from the 100bp+ BoE tightening outlook that money markets remain constrained,” ING said in a note.
It rose 0.3% to 0.6667, as the Australian dollar continued to benefit from the RBA’s surprise rally this week and fell 0.2% to 139.88, taking some support from an upward revision of the country’s Q1 reading.
It rose 0.1% to 7.1333, with the yuan hitting a six-month low against the dollar amid growing expectations of an interest rate cut by the People’s Bank of China this month.