Dollar retreats after Fed meeting, while euro shines ahead of ECB By Investing.com

Investing.com – The US dollar fell in early European trade on Thursday, extending the previous session’s sell-off after the Federal Reserve signaled a pause to the year-long tightening cycle following its latest rate hike.

At 02:55 ET (06:55 GMT), the greenback, which measures the greenback against a basket of six other currencies, was trading 0.2% lower at 100.14, after falling more than 0.6% in the previous session.

Wednesday’s rate hike of 25 basis points was widely expected and, more importantly, he no longer “anticipated” further rate increases would be required to tame inflation.

This should “mark the end of this hiking cycle as the Fed may rely on the impact of financial conditions stemming from the recent banking crisis to deliver the final bit of tightening,” ING analysts said in a note.

The fragility of the US banking system has also affected the greenback recently, with the weekend crash First Republic Bank (NYSE::) which means three regional banks have hit a wall in the past two months.

Unrest continued late Wednesday Backwest Bancorp (NASDAQ:) stock (NASDAQ:) fell more than 50% in after-hours trading after Bloomberg reported that the bank will explore strategic options on Thursday.

Thursday’s focus now shifts to , which is expected to raise interest rates later in the session, likely by 25 basis points, without providing the pessimistic assessment of future policy.

It rose 0.2% to 1.1075, just below a one-year high of 1.1096, and is likely to advance to its highest level since 2021, according to analysts at Deutsche Bank.

“We see EUR/USD continuing to drift towards 1.15 by the middle of the year,” the German bank said. “While the Fed now appears open to a pause, the ECB may still have work to do and we expect it to accelerate its QT program.”

March data for the Eurozone is due later in the session and while it is expected to show a decline of 1.7% for the month, this still represents a gain of 5.9%.

It was trading 0.1% higher at 1.2575, near an 11-month high of 1.2594, and is also expected to contract next week as inflation continues to rise.

The Yen fell 0.3% to 134.29, as the Yen was helped by lower US bond yields as well as increased safe-haven demand in the wake of growing concerns about US banks.

The Australian dollar rose 0.1% to 0.6673, with the Aussie supported by strong data, while it fell 0.1% to 6.9059 as China reopened after the “Golden Week” holiday.