Dollar rises as market takes 4Q GDP in its stride

Dollar rises as market takes 4Q GDP in its stride
Dollar rises as market takes 4Q GDP in its stride
© Reuters.

By Geoffrey Smith — The dollar edged higher in early trade in Europe on Friday, but was still on course to end the week lower as the market consolidated around expectations of a smaller increase in interest rates from next week’s Federal Reserve meeting.

The release of slightly stronger than expected fourth quarter growth data from the U.S. on Thursday did little to change that calculus, with the breakdown of the numbers showing that slowed more than expected and the quarterly index for also fell surprisingly sharply.

“While inflation is still well above target and unemployment is at a cycle low, there are signs that the economy is responding to tighter monetary policy and the Fed will be cognisant of fears that hiking rates too hard and fast risks toppling the economy into recession,” analysts at ING said in a morning note.

Consensus is now firmly in favor of the raising the target range for fed funds by only 25 basis points next week, after already shifting from a 75 to 50 basis point increment at its last meeting in December. The release of the December price indices for – the Fed’s favored measure of inflation – at 08:30 ET (13:30 GMT) later will have to be a long way off the forecast 4.4% to change anyone’s minds at this stage.

Shifting expectations for Fed policy have underpinned European currencies on the crosses all week since the and the are both widely perceived as still needing to raise rates more in order to tame inflation.

Fourth quarter data are starting to dribble out from the Eurozone, with saying on Friday that its economy grew 0.2% in the period, in line with forecasts. Data from , , and – the Eurozone’s three largest economies – are due next week. The Deutsche Bundesbank has already said it estimates the German economy stagnated.

By 03:20 ET (08:20 GMT), the was down 0.2% at $1.0869, while the , which tracks the euro against a basket of six advanced economy currencies, was up 0.1% at 101.78.

Further afield, the spotlight is likely to be on Pakistan, where the tumbled some 10% on Thursday as the central bank – under pressure to defend its dwindling foreign reserves – abandoned attempts to defend its exchange rate with the dollar. The country was devastated last year by floods that wiped out much of its agricultural sector and also badly hit industry.

Liberalization of the exchange rate has been one of the International Monetary Fund’s chief conditions for resuming disbursements under a $7 billion financing package that was suspended last year.

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