© Reuters.
Investing.com – The US dollar was on alert in early European trade on Tuesday, as traders braced for a more hawkish stance from the European Central Bank from the Federal Reserve ahead of policy-setting meetings next week.
At 02:50 ET (06:50 GMT), the greenback, which measures the greenback against a basket of six other currencies, was trading slightly lower at 101.070, near a fresh 10-day low after falling 0.4%. % Overnight.
It is widely expected to raise interest rates by another 25 basis points at its policy-setting meeting next week, but expectations are growing that the central bank will start cutting rates later this year.
Recently released economic data indicated a slowdown in the US economy, while news released overnight indicated that deposits fell at a low level. First Republic Bank (NYSE:) highlighted the fragility of the country’s banking system.
US first-quarter data, due on Thursday, is expected to show that growth slowed from the previous quarter, and it would take a sharp bullish surprise from Friday – the Fed’s preferred inflation measure – to change the dovish narrative.
Analysts at ING said: “Unless core US PCE inflation on Friday in March surprises significantly above a record 0.3% m/m, expectations for one last Fed hike appear firm and we suspect the dollar needs to The rise is too much,” the analysts at ING said, in a note.
It rose 0.1% to 1.1048, with a significant 50bps rise remaining as a direct option at next week’s central bank meeting.
It rose slightly in April, according to the Ifo institute’s business climate index, released on Monday, adding to hopes that Europe’s largest economy has managed to avoid a winter recession.
In addition, inflation reports for April from the region’s largest economies, due later this week, are likely to indicate that inflationary pressures will continue to rise.
All of this points to a rate hike next week, with central bank board member Isabel Schnabel telling Politico that a 50 basis point rate hike was not off the table and would depend on the data.
It fell 0.1% to 1.2473, off a 10-day high hit earlier, with interest rates also expected to rise next week after rising 10.1% in March from a year earlier, driven by the sharpest increase in food costs in more than four decades.
It fell 0.2% to 0.6681 before Wednesday’s data, while it traded flat at 134.22, ahead of the first political meeting of Governor Kazuo Ueda in charge of the government.