Por Geoffrey Smith
Investing.com – The dollar was little changed at the start of trading on Thursday in Europe as the market seemed quiet awaiting US GDP figures before taking any new positions.
By 08:55 AM ET (0855 GMT), the , which tracks the currency against a basket of six other major currencies, was holding virtually unchanged at 101.39. Individual crosses were no more exciting, with the trade up less than 0.1% to $1.0964 and the trade up less than 0.1% to $1.2407.
All indications are that the US economy will have slowed in the last quarter of last year, as high inflation and rising financing costs dampened consumer spending. However, improving supply chain problems and falling energy prices towards the end of the year are expected to have provided some support, along with a job market that has not weakened much.
Analysts expect growth to slow to an annualized rate of 2.6%, from 3.2% in the third quarter.
The announcement by , which has said it will “pause” interest rate hikes after Wednesday’s 25 basis point hike, has sparked speculation that it will do the same soon, keeping pressure on the dollar.
Markets expect a similar pause from the after its meeting on Thursday, at which it is expected to raise interest rates by 50 basis points to 7.5%.
“The rand has underperformed this year and you would expect the pair’s huge reversal to drag it well below 17.00,” ING (AS:)’s Chris Turner said in a note to clients. “That hasn’t happened, perhaps due to weak domestic demand prospects in South Africa amid continued power supply problems.”
However, Turner believes that the softer dollar environment and China’s economic recovery should make for “a bullish cocktail for the rand”, noting that both factors should support demand for South Africa’s commodity exports. The rand is holding steady at 17.099 to the dollar, having traded sideways since late November.
On the other hand, the “quiet periods” leading up to the central bank meetings in , , and next week guarantee that there will be no statements by central bankers that can be negotiated. Right now, markets expect a further 100 basis point adjustment by the ECB at its next two meetings, while the outlook for the Bank of England is less clear given the three-way split in the Monetary Policy Committee decision. from their last meeting.