Dollar and Euro on eve of central banks meetings
2023.02.01 11:22
Dollar and Euro on eve of central banks meetings
By Ray Johnson
Budrigannews.com – The dollar fell on Wednesday ahead of the expected 25 basis point increase in interest rates by the Federal Reserve. Investors will be watching to see if Fed Chair Jerome Powell speaks hawkishly about the future of monetary policy.
Even though investors anticipate rate cuts for the second half of the year, Fed officials have emphasized the necessity of holding rates in restrictive territory for a while to reduce inflation. The U.S. central bank is seen as nearing the end of its tightening cycle.
Adam Button, chief currency analyst at ForexLive in Toronto, stated, “The market is expressing a great deal of confidence that the terminal fed rate will be lower than the FOMC has indicated.” The dollar will rise if the Fed is hawkish, but the market doesn’t seem to be worried.
Fed officials have predicted that the benchmark rate will rise above 5%, but traders in Fed funds futures are pricing in a rate of 4.91 percent in June and a return to 4.47 percent in December.
The was last down 0.32 percent at 101.78 on Thursday, and it is still just above the low of 101.5 it reached eight months ago.
According to the ADP National Employment report released on Wednesday, private payrolls in the United States increased by 106,000 jobs in January, significantly less than was anticipated, indicating a cooling in the labor market.
The government’s jobs report for January, which is expected to show that employers added 185,000 jobs during the month, will be the primary focus of U.S. economic attention this week.
According to Button, “Hiring is slowing and the jobs market isn’t as hot as it was a year ago, but it’s not clear if its cooled down enough to stop wage inflation.”
It is anticipated that wages increased by 0.3 percent in the month, for a gain of 4.3 percent annually.
Data indicating that inflation in the bloc had decreased for the third consecutive month in January had little effect on the euro.
At $1.09025, the single currency was up 0.38 percent against the dollar.
Investors stated that Thursday’s monetary decision by the European Central Bank (ECB) would not be affected by data on inflation in the euro area.
On Thursday, both the ECB and the Bank of England are expected to raise interest rates by 50 basis points.
To $1.23360, sterling gained 0.15 percent. To 129.44, the dollar lost 0.51 percent against the Japanese yen.
