The euro and pound fell against the dollar on Friday as investors speculate that interest rates in Europe will stay low for longer, a day after currency markets brushed aside high US inflation, which is likely to be temporary. …
The dollar index last climbed 0.46% to 90.4790, while the euro fell 0.53% to $ 1.2112.
The day after the European Central Bank stuck to its dovish stance, ECB politician Klaas Noth said flexible fiscal rules would be needed for years as monetary policy remained tight. read more
“ECB policymakers indicate that inflation rates are well below the levels needed to raise rates,” said Carl Chamotta, chief market strategist at Cambridge Global Payments in Toronto.
“This cuts back on the recent rally in the euro, putting some downward pressure on it. The biggest contributor to the move we’ve seen overnight is (euro) weakness versus idiosyncratic positive dollar strengths. The dollar wins the reverse beauty contest. “
Sterling fell 0.43% to $ 1.4115, further undermined by the rapid spread of the Delta option in the UK, raising fears that much of the country may not be able to fully exit the lockdown on June 21 as planned. read more
“You are seeing a weakening of the pound sterling due to a possible delayed reopening,” added Chamotte. “This certainly reduces the likelihood of a full and quick recovery, especially on the consumption side. This lowers the estimates and pushes the Bank of England to further tighten policy in the future. “
Forex markets were sluggish all week ahead of Thursday’s US consumer price data, which rose 5% year-on-year in May.
But even though this figure was above expectations, the market reaction was negligible. Investors seem to agree with the Federal Reserve’s assertion that any rise in inflation is temporary and that it is too early to discuss reducing its monetary stimulus. read more
However, traders were eagerly awaiting the FOMC meeting scheduled for the week ahead. Economists see the central bank will announce a strategy to cut its massive bond buying program in August or September, but don’t expect it to start cutting monthly purchases until early next year, a Reuters poll showed. read more
Investors, meanwhile, left more risky currencies such as the Australian dollar fell 0.63% against the US dollar and the New Zealand dollar fell 0.92% to hit $ 0.7129.
As far as cryptocurrencies are concerned, bitcoin, which has rebounded slightly in recent sessions, has been trending up 4% over the week and most recently up 1.6% to $ 37,288 per day. Ether, however, last fell 0.4% and is set to fall 9% over the week. Both are still trading well below their previous highs.
Currency purchase prices at 10:18 (1418 GMT)
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