Dollar slides on banking, growth concerns; euro gains post ECB

Investing.com – The U.S. dollar fell in early European trade Friday, as traders fretted that the continued turmoil in the U.S. banking system could result in earlier-than-expected rate cuts by the Federal Reserve.

At 03:10 ET (07:10 GMT), the , which tracks the greenback against a basket of six other currencies, traded 0.2% lower at 101.23, having dropped more than 0.6% in the previous session.

The raised interest rates on Wednesday, but hinted that this would be the peak of its year-long aggressive tightening cycle by removing the phrase that it “anticipates” further rate increases from its accompanying statement.

The Fed emphasized the importance of the upcoming data in its future decision-making, and thus the official jobs report due later in the session will be studied carefully.

However, the health of the country’s banking system is also a factor that traders are including as they price in more aggressive rate cuts from the Fed in the second half of the year.

Shares of PacWest Bancorp (NASDAQ:) slumped on Thursday after the regional lender said it was exploring strategic options, including a sale, while Canada’s Toronto Dominion Bank (TSX:) called off its $13.4 billion takeover of First Horizon (NYSE:), in another sign of stress within the sector.

This comes just days after regulators seized First Republic Bank and JPMorgan Chase (NYSE:) agreed to buy its deposits and most of its assets.

rose 0.3% to 1.1038, the day after the hiked its benchmark interest rates by 25 basis points, with President signaling more tightening to come.

That said, fell significantly more than expected in March, slumping by 10.7% from the previous month, the largest month-on-month decline since 2020 at the height of the COVID-19 pandemic.

“EUR/USD remains close to the highs of the year as a Fed pause and simmering banking crisis cut the dollar’s short-term yield advantage over the euro,” said analysts at ING, in a note.

traded 0.5% higher at 1.2630, hitting a new one-year high, with the remaining in a pitched battle with inflation.

Headline consumer price inflation in last came in at 10.1%, which is five times the BOE’s mandate and well above the 6.9% headline rate in the and 5% in

The BOE was the first to tighten back in December 2021, and is expected to increase rates a quarter point to 4.5% next week.

fell 0.1% to 134.08 in holiday-thinned trade, while rose 0.7% to 0.6743 as a report from the reiterated that interest rates could still rise further, after its surprise hike earlier in the week.

rose 0.1% to 6.9115 after softer-than-expected raised further concerns over China’s post-COVID economic rebound.

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