DOLLAR
The pound reached a more than one-year high versus the dollar on Monday as the currency struggled to start the week. Traders speculated that the pound may have peaked with U.S. interest rates while keeping a close eye on impending inflation and lending data.
The pound recently traded just below that level, up 0.26% on the day, after peaking at $1.2668, its highest level since April 2022.
This week, attention is on the pound because of an anticipated rate hike by the Bank of England on Thursday. It has also been strengthening against the euro.
The euro last traded at 87.23 pence after falling to its worst level versus the pound this year on Friday at 87.11 pence.
Goldman Sachs updated its three-month prediction for the euro on Friday to 86 pence and stated: “We think that the same factors that acted as headwinds on Sterling in 2022 – mostly natural gas prices and the relative stance of BoE policy – have turned into tailwinds.”
However, the euro has gained ground against the dollar from its lows in September and was up 0.29% at $1.10505 on hopes that the European Central Bank will maintain high interest rates for a longer period of time than the U.S. Federal Reserve.
Despite sounding a little more cautious than peers about the outlook and removing advice about the need for more rate rises, the Fed increased rates by 25 basis points last week.
Despite stronger-than-expected U.S. employment statistics posted on Friday, U.S. interest rate futures are pricing approximately a one-third likelihood of a rate decrease as early as July, according to the CME FedWatch tool.
Last week, the ECB also lowered the rate at which it raised interest rates, but it also hinted at further tightening.
US continue to narrow, removing a headwind for (the euro vs. the
“While financial markets continue to price interest rate cuts for the US this year and further interest rate hikes from the ECB, we expect EUR/USD to remain supported,” the statement reads.
Important counterparts, fell 0.25% to 101.06. Its lowest point in a year was 100.78 last month.
After three U.S. institutions collapsed in recent weeks, the Fed’s loan officer survey might reveal later on Monday if and to what extent banks are tightening credit policies. If interest rates fall as a result, this could hurt the dollar.
The Treasury Secretary’s warning that the country would not be able to pay obligations by June 1 will likely cause traders to keep an eye on news coming out of Capitol Hill as legislators attempt to break an impasse over the approaching U.S. debt ceiling.
On Wednesday, reports on US inflation are expected.
Compared to other currencies, the dollar was 0.1% higher versus the yen at 135.02 but down 0.24% against the Swiss franc, another well-known safe haven, to 0.8885.
The Australian dollar increased by as much as 0.74% on the day, reaching a three-week high of $0.680.
