By Peter Nurse
Investing.com – The dollar loses positions this Friday, although it remains just below its 16-month highs, as rising inflation in the United States causes traders to position themselves for the Federal Reserve to raise interest rates more quick than expected.
At 8:55 a.m. (CET), the, which tracks the evolution of this currency against a basket of six other major currencies, fell 0.1% to 95.123, just below the 16-month highs recorded in 95.267. The index is on track for a gain of around 1% this week, the highest since the week ending June 20.
The pair remains flat at the level of 1.1451, just above the 16-month lows recorded at 1.1436, the pair rises 0.1% to 114.17, while it points to a rise of 0, 1% to the 1.3385 level, just above the lows of 1.3354, this year’s lows.
The catalyst for these gains in the dollar was the release of US consumer price data on Wednesday, which showed the dollar grew 6.2% year-on-year in October, its fastest annual pace since 1990.
These persistent high levels of inflation are fueling speculation that policy makers at the Federal Reserve will be forced to retract their belief that price pressures will be “transitory” and rates will rise. interest earlier than stated above.
Markets are now pricing in a first rate hike in July and highly likely another in November.
“It is clear that rising inflation is becoming a problem for both the Administration and the Fed. In this sense, we suspect that Washington will not mind that the dollar hits highs this year, since the currency could contribute apart from the adjustment of monetary conditions “, say ING (AS 🙂 analysts in a note.
Taking this into account, it seems likely that the dollar will continue to gain ground, especially against the euro, after the president of the European Central Bank, Christine Lagarde, said last week that it is highly unlikely that interest rates will rise next year. It is coming, which made the market bets back due to a movement already this coming, it is October.
“The EUR / USD pair has left the 1.1500 support level behind without pain or glory,” says ING, and “technically, the spot movement seems to be able to extend to the 1.1300 / 1330 zone this month.”
During this day, the University of Michigan Consumer Confidence Index and the JOLTs Job Offer Index for September will be published, but traders will focus especially on the speech of the president of the New York Fed , John Williams, in an online conference that will take place this Friday, as it could give clues about the reaction of the Fed to the high inflation.