Dollar is declining ignoring economic data
2023.01.25 14:20
Dollar is declining ignoring economic data
By Kristina Sobol
Budrigannews.com – Due to investors’ reluctance to place significant bets ahead of the Federal Reserve and European Central Bank meetings next week, the dollar fell against the euro on Wednesday in muted trading.
Additionally, holidays for Lunar New Year are observed in a lot of Asia. Consequently, most major currencies stuck to established ranges.
Karl Schamotta, chief market strategist at Corpay, stated, “Trading ranges remain remarkably compressed ahead of the central bank meetings next week.”
The Fed is expected to raise interest rates by 25 basis points (bps) on Wednesday, down from 50 bps in December, according to traders. In the meantime, the European Central Bank (ECB) is almost certain to raise its key rate by half a percentage point next week.
“Last year’s big directional trades have given way to a more nuanced landscape, with global demand conditions holding up, inflation subsiding, and terminal rate expectations well below their peaks,” Schamotta stated.
Sluggish trading conditions were exacerbated by the absence of significant U.S. data releases on Wednesday.
However, given that the Commerce Department of the United States is scheduled to release its initial advance fourth-quarter gross domestic product estimates on Thursday, Schamotta stated that there was the potential for market movements to intensify later this week.
“The numbers for personal consumption and gross domestic product that are due tomorrow and the day after tomorrow may surprise. “If the post-pandemic era has taught us anything, it is that “bullwhip effects” can have consequences for the real economy that are extremely unpredictable,” he stated.
At $1.0895, the euro was 0.06 percent higher than Monday’s nine-month high of $1.0927.
Business activity in the euro zone unexpectedly returned to modest growth in January, according to data released on Tuesday. The euro has also been supported by expectations of additional rate increases from the European Central Bank.
According to survey data released on Wednesday, German business morale improved in January as inflation eased and the outlook improved.
On the other hand, according to data released on Tuesday, U.S. business activity decreased for the seventh consecutive month in January, albeit at a moderate pace across manufacturing and services for the first time since September.
The dollar was at 129.575 yen per dollar, down 0.45 percent from its January 16 low of 127.215, which was nearly 8 months ago.
In another area, on Wednesday, inflation data that came in higher than anticipated bolstered the case for additional rate increases from the Reserve Bank of Australia, pushing the Australian dollar to a record high of more than five months.
The Australian dollar was last at $0.7065, up 0.28 percent.
As a result of the country’s annual inflation rate of 7.2% in the fourth quarter falling short of the central bank’s forecast of 7.5%, the New Zealand dollar was down 0.81 percent to $0.6455.
Before the Bank of England policy meeting next week, data showed that British manufacturers unexpectedly lowered their prices in December, which suggested that inflation may be easing. This resulted in sterling being -0.1% lower against the dollar.
The Bank of Canada raised its benchmark overnight interest rate by 25 basis points on Wednesday to 4.5 percent, the highest level in 15 years, and stated that it would likely pause to evaluate the impact of previous increases. This resulted in a rise in the value of the dollar against the Canadian currency.
In the meantime, bitcoin was little changed throughout the day, trading at $22,520. It had gained about a third of its value since the beginning of January, following severe losses brought on by the well-publicized collapse of the FTX crypto exchange.
