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Investing.com – The US dollar rose in early European trade on Friday, but remained on track for its biggest weekly decline since July after the Federal Reserve signaled interest rate cuts next year while central banks in Europe stuck to their hawkish paths.
The dollar index, which tracks the greenback against a basket of six other currencies, is up 0.44% at 102. The index is down more than 2% this week so far.
The Fed moves the dollar
Both expressed their desire to keep policy tight over the next year to combat inflation, as they kept interest rates unchanged on Thursday.
The ECB said easing monetary policy was not even brought up at a two-day meeting, and the Bank of England said interest rates would remain high for an “extended period.”
This contradicts the Federal Reserve’s trend towards lowering interest rates, and means that the dollar will remain out of favor as the end of the year approaches.
“As the dust settles after a turbulent period of central bank meetings, we are left to conclude that European policymakers have chosen to pull back further than the Fed when it comes to market pricing for 2024 rate cuts,” analysts at ING said. note.
There is more US economic data to digest later in the session, including November production and the .
Speaking now is Fed member John Williams, who says that the Fed is not currently discussing reducing interest rates. The Fed may raise interest rates if necessary.
Following the Fed’s statements, it turned bearish with the US dollar index rising.
The Euro and the British Pound are retreating from their recent highs
It fell 0.3% to 1.0953, just below 1.1009, the highest level in two weeks touched on Thursday, after PMI data showed it deteriorated in December. Which increases the possibility of a recession in Europe’s largest economy at the end of the year.
However, while the ECB’s next step should be to cut interest rates from record high levels, the central bank should “relish this view” for a while, French central bank President François Villeroy de Galhau said on Friday, suggesting… This means that an interest rate cut is not imminent.
It fell 0.2% to 1.2747, with the British pound rising 1.1% to a four-month high on Thursday after the Bank of England’s hawkish approach.
“Among recent central bank meetings, the Bank of England has perhaps delivered the most significant pullback against dovish expectations,” ING said. “There was nothing in their statement that encouraged a cautious outlook for 2024.”
The yen stabilizes ahead of the Bank of Japan meeting next week
In Asia, trading fell by 0.1% to 141.75, with the Japanese yen stable near its highest level in four months against the dollar, after rising sharply against the dollar in recent sessions.
But further gains in the yen are uncertain, as the Bank of Japan is expected to maintain its extremely cautious stance at its final meeting of the year next week.
Tadawul fell 0.1% at 7.1035, after the People’s Bank of China pumped 1.45 trillion yuan ($200 billion) into the economy through medium-term lending facilities.
Economic data also provided some positive signals regarding China. It grew more than expected in November, although investment in fixed assets missed expectations.
It rose 0.3% to 0.6717, as the Australian dollar, a leading indicator of Asian risk sentiment, rose to its highest level in more than four months.
2023-12-15 13:53:00
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