Folded stack of $100 bills
Igor Golovniov | SOPA Pictures | light flare | Getty Images
The dollar was at a two-week high against the euro on Friday, ahead of inflation data that is expected to guide the Federal Reserve’s policy tightening trajectory, and after the European Central Bank announced it would launch its rate hike campaign next month.
U.S. core consumer price growth is expected to slow a fraction, data later in the global day should show. Such a result would reassure those hoping that inflation, which has been high for decades, peaked in March and that April’s pullback was not a one-off.
That could give the Fed some leeway to raise rates less aggressively later in the year as it tries to contain inflation without tipping the economy into recession.
In the shorter term, markets expect the Fed to announce the second of three consecutive 50 basis point interest rate hikes next week, which has boosted the dollar in recent months.
The dollar index, which measures the greenback against six peers, was flat at 103.3 after gaining 0.7% overnight.
It rebounded 1.1% this week, which would be its biggest percentage gain since the last week of April.
The index “seems to have navigated a more determined and hawkish ECB with relative ease. Their plans to raise rates by 25bp in July and September and file potentially larger increases were obviously no more hawkish than expected,” Westpac analysts said.
Analysts said the index appeared to be settling in a 101-105 range, with room to test the upper end if U.S. CPI data and next week’s Fed meeting underline the potential for higher US returns.
The euro touched $1.0611 in early Asian trade, its lowest level since May 23, after losing 0.92% against the dollar on Thursday after a volatile session led by the ECB.
The central bank of the 19 countries that use the euro said it would end quantitative easing on July 1 and then raise interest rates by 25 basis points on July 21. The ECB announced a bigger rate hike in September unless the inflation outlook improves in the meantime. period.
The euro also lost 0.55% against the pound overnight and 0.86% against the Japanese yen, after hitting a seven-and-a-half-year high.
The yen was unable to gain ground against the greenback, trading at 134.16 to the dollar at the start of Asian trading on Friday, around a 20-year low it recently rode.
The Bank of Japan, unlike its major peers, has repeatedly pledged to keep interest rates low, sending the yen down to a striking distance of 135.20 on January 31, 2002. A breakout that would be its lowest since October 1998.
The risk-sensitive Australian dollar remained under pressure at $0.709, down 1.65% this week, hurt by falling stock markets, while the pound was also weaker against the dollar at $1.2486.
Bitcoin was at $29,800, having failed in its latest attempt to maintain a break above $30,000, the level it has been trading near for the past month.