Dollar rising after release of strong economic data
2023.01.26 12:04
Dollar rising after release of strong economic data
By Tiffany Smith
Budrigannews.com – On Thursday, data showed that the U.S. economy maintained a strong pace of growth in the fourth quarter, despite the fact that momentum appears to have slowed toward the end of the year. As a result, the dollar edged higher against the euro.
In its preliminary estimate of GDP growth for the fourth quarter, the Commerce Department stated that gross domestic product increased at an annualized rate of 2.9%. In the third quarter, the economy expanded at a 3.2% annual rate. According to Reuters’ poll of economists, GDP would grow at a rate of 2.6%.
For the week ending January 21, initial claims for state unemployment benefits decreased by 6,000 to a seasonally adjusted 186,000, according to a separate Labor Department report.
Stuart Cole, head macro economist at Equiti Capital in London, stated:
“A somewhat mixed picture painted by the U.S. data.”
Cole stated that the data point to an economy that is still demonstrating resilience in the face of the Fed’s current rapid monetary tightening.
He stated:
“But inventories, a component that is almost certain to weaken as we go through 2023, was a big contributor to this growth story.”
According to Cole:
“Thus, overall, a neutral picture I would say in terms of the impact the data will have on expectations of Fed policy going forward”
The euro was 0.28 percent lower at $1.0884, but it was still within striking distance of Monday’s nine-month high of $1.09295.
At 130.345 yen, the dollar was up 0.59 percent against the yen.
The Federal Reserve and the European Central Bank’s meetings next week are now the focus of attention.
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.
Even though traders remained concerned about the challenge that the Bank of England faces in controlling inflation without harming an economy that is already in recession, sterling was about flat against the U.S. dollar on the day and was on track to record a narrow gain for the week, marking its third straight weekly rise.
After data showed that Australian inflation surged to a 33-year high last quarter, the touched a new 7-month high of $0.71425 on growing expectations that more Reserve Bank of Australia interest rate hikes are on the way.
On Thursday, a day after the Bank of Canada raised interest rates as anticipated, a move that could signal the end of the central bank’s aggressive tightening campaign, the Canadian dollar edged higher against its counterpart in the United States.
In the meantime, bitcoin remained unchanged at $22,995 throughout the day, despite having increased by approximately a third in value since the beginning of January, following significant losses brought on by the well-publicized collapse of the FTX crypto exchange.
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