January 28, 2023

Monetary policy easing prospects boost dollar

LQDFX Forex news Blog Monetary policy easing prospects boost dollar

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Monetary policy easing boosted dollar against euro, which fell to a one-week low on Wednesday. The common currency dipped towards the lower end of this year’s trading range.

Analysts say it is unlikely the euro will recover significantly before a European Central Bank meeting next week. The expectations are that policymakers might unveil plans for fresh monetary stimulus. Nearly two interest rate cuts of 10 basis points are priced in by money markets for 2019. Euro was one of the worst-performing currencies this week along with sterling. The common currency was unchanged at $1.1214.

The currency dropped earlier to $1.1200, the lowest since July 9. It has fallen by 2.2% so far this year against the dollar and traded within a relatively narrow range of $1.15 and $1.11. Corporates and other market participants do not look overly concerned about big fluctuations in the euro.

The dollar rose on Tuesday. Stronger-than-expected June U.S. retail sales data dampened expectations that the Fed could cut interest rates by 50 basis points rather than 25 bps at its month-end policy review. An index which tracks the dollar against a basket of currencies surged to a one-week high of 97.44. Yet, it was last down marginally at 97.309. Some experts doubt the dollar’s robust performance is sustainable.

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Forex – Monetary policy easing prospects boost dollar

The euro fell on Tuesday after signs of deteriorating sentiment among German investors. However, the prospect of more central bank easing meant another day of small, contained currency moves. The euro weakened 0.2% to $1.1239.

The pound fell below $1.24 on Wednesday, levels not plumbed for more than two years. Investors continued to price the growing risk of Britain’s crashing out of the European Union without a transition agreement in place.

By 1030 GMT, the pound GBP=D3 was trading at $1.2398 after earlier touching its lowest level since April 2017. The pound has lost 1% against the euro this month and around 2.3% against the dollar, putting it on track for its biggest monthly drop since June 2018. It is this year’s worst-performing G10 currency against the dollar.

Oil prices regained little ground lost in the previous session, weighed down by industry data suggesting U.S. crude inventories fell less than expected. Brent crude futures gained 87 cents to $65.22 a barrel. Both benchmarks had shed more than 3% on Tuesday. West Texas Intermediate crude futures were up 69 cents at $58.31 a barrel by 1239 GMT.

Gold prices slipped on Wednesday as the dollar held near a one-week high on the back of better-than-expected retail sales data from the United States. Also, investors waited for direction on interest rates from the U.S. Federal Reserve. Spot gold fell 0.3% to $1,402.42 per ounce as of 1131 GMT.

PLEASE NOTE The information above is not investment advice.

Sources: Reuters, Investing, CNN money