© Reuters. US dollar and euro banknotes are shown in this illustration taken on July 17, 2022. REUTERS/Dado Ruvic/Illustration
By Kevin Buckland
TOKYO (Reuters) – The euro hovered near a one-year high against the dollar on Thursday, as Europe’s resilient economy contrasted with risks of banking contagion in the United States, a debt ceiling and a possible recession.
Risk-sensitive folks struggled to stay above the key 66-cent mark, while leading cryptocurrency bitcoin found its home around $29,400 after wild swings in the previous session.
The yen was in a steady state as the Bank of Japan kicked off its two-day policy meeting, the first under new governor Kazuo Ueda.
The European single currency rose 0.05% to $1.10415, heading back towards an overnight peak of $1.1096, the highest level since April last year.
– which measures the greenback against six major peers, and the euro the heaviest weight – was little changed at 101.41, after declining 0.42% on Wednesday, when it touched a nearly two-week low of 101.00.
Germany again revised growth expectations upwards on Wednesday, and a survey showed a continued recovery in consumer confidence.
By contrast, spending on capital goods in the US fell more than expected in the latest data overnight, adding to concerns about deflation. Mood didn’t help First Republic Bank (NYSE: Continued Recession, or Continued Debate Over Extending the US Debt Ceiling.
Christina Clifton, senior currency strategist at the Commonwealth Bank of Australia (OTC:), wrote in a client: “A resilient eurozone economy combined with core inflation still rising rather than falling could see the European Central Bank maintain its hawkish stance.” support the euro. NB.
At the same time, US inflation is showing stubborn decoupling with growth, which keeps pressure on the Federal Open Market Committee to tighten policy further, Clifton said.
“The risk of more than one hike in the (Feed) funds rate is an upside risk for the US dollar in the coming months.”
Traders are currently placing odds of 80% on another quarter-point rally on May 3, but that is seen as the potential peak, with a cut-off of up to 2 points towards the end of the year.
IG analyst Tony Sycamore also sees risks to the downside for the EURUSD. And as long as the pair is below the monthly resistance at around 1.1075, “it remains vulnerable to a decline to 1.0800,” he wrote in one of the reports.
Meanwhile, the dollar was little changed at 133.63 yen. The market consensus is that Ueda will leave the ultra-easy policy settings unchanged on Friday, but no one is willing to rule out another surprise such as the sudden doubling of the 10-year yield range in December.
Australian dollar traders are more confident that the Reserve Bank of Australia will keep interest rates unchanged for a second meeting next week after some softness in consumer inflation data on Wednesday.
The currency settled at $0.6603 on Thursday, after falling to a one-and-a-half-month low of $0.6592 in the previous session.
to around $29,060, after a day when it jumped to $30,022, only to drop to $27,242.
The initial strength was driven by US banking concerns, IG’s Sycamore says, but the market was “seemingly spooked by heavy selling demand.”
Provided bitcoin remains above $25,000, Sycamore expects the coin to test this month’s high of $31,035.