Dollar Edges Lower; Euro Recovery Gains Traction

Dollar Edges Lower; Euro Recovery Gains Traction
Dollar Edges Lower; Euro Recovery Gains Traction
© Reuters.

By Peter Nurse – The U.S. dollar drifted lower in early European trade Wednesday, retreating from the 20-year peak seen earlier in the week as a nascent rebound in the euro gathers pace.

At 3:00 AM ET (07:00 GMT), the , which tracks the greenback against a basket of six other currencies, traded 0.1% lower to 108.662, after starting the week at a new two-decade high at 109.48.

The latest U.S. employment data, the , pointed to continued strength in the labor market despite the string of large rate by the Federal Reserve.

This, combined with continued hawkish comments from a number of Fed officials, point to the U.S. central bank hiking by a probable 75 basis points in September. 

However, the dollar is struggling to make any further headway as European Central Bank members have joined the fight to combat inflation, also expressing strong determination to do so at the .

The ECB must act decisively to contain inflation, Bundesbank chief Joachim Nagel said on Tuesday, while Belgian central bank Chief Pierre Wunsch said interest rates need to rise to a level that starts to restrict economic activity or above what is considered the “neutral” rate.

The euro plays a big role in the overall direction of the greenback, making up almost 60% of the dollar index, and this hawkish testimony has helped the single currency climb over 1% from its Aug. 23 two-decade low. 

With this in mind, the release will be in focus later Wednesday, with annual inflation expected to accelerate to 9.0% from 8.9% in July, well above the ECB’s 2% target.

The Eurozone and the U.K. are both heading for recessions this year, Goldman Sachs said, in a recent note, but surging inflation will still force the region’s two biggest central banks to raise interest rates sharply.

rose 0.1% to 1.0017, while rose 0.2% to 1.1680, with Goldman Sachs warning that U.K. inflation could top 22% next year if natural gas prices remain elevated in the coming months.

fell 0.3% to 138.39, after data showed Japanese grew more than expected in July.

fell 0.2% to 6.8952, with the Chinese yuan benefiting from data showing shrank slightly less than expected in August – the manufacturing purchasing managers index coming in at 49.4, slightly above expectations of 49.2. 

The risk-sensitive rose 0.6% to 0.6895, boosted by the signs of recovery in the Chinese manufacturing sector, given Australia is a major exporter of commodities to China.

Leave a Reply

Your email address will not be published. Required fields are marked *

New Brokers
2.8 rating
Buy & sell Crypto in minutes
3.0 rating
Note: Investing involves risks. You can lose your deposit. We advise you to only invest in financial products which match your knowledge and experience.
2.0 rating
Interactive Brokers attracts active traders with low per-share pricing, an advanced trading platform.
4.3 rating
eToro is the world’s leading social trading platform, with thousands of options for traders and investors.
Risk Warning: The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory or other services by AdonFinance. In addition, the content of the website offers no opinion with respect to the suitability of any security or any specific investment. Trading foreign exchange, stocks, cryptocurrencies and commodities is potentially high risk and may not be suitable for all investors. The high level of leverage can work both for and against traders. Before any investment with any broker you need to carefully consider your targets, previous experience, and risk level. Forex trading can result in the loss of your money, as a result, you are expressly cautioned that you should never invest or trade with money that you cannot afford to lose. For the avoidance of doubt, AdonFinance's service provides Brokers reviews in the Financial market. AdonFinance, its subsidiaries, agents or affiliates will assume no responsibility whatsoever for your trading activity. © Copyright 2021 AdonFinance