Por Peter Nurse
Investing.com – The US dollar soars at the start of trading this Friday in Europe, hitting a two-decade high ahead of the release of the monthly US employment report, which could pave the way for a higher adjustment of monetary policy.
At 9:00 AM ET, the , which tracks this currency against a basket of six other major currencies, is up 0.2% to 104.040, marking the first time the index has broken above 104. in 20 years.
The US Federal Reserve on Wednesday announced a 50 basis point hike, its biggest increase since 2000, and while Chairman Jerome Powell has indicated that policymakers are not actively considering more substantial moves in the future, the market is not so sure.
“A sustained decline in the dollar would require confidence that the Fed can carry out an orderly tightening cycle, easing pressure on the US economy and providing a soft landing,” say analysts at ING (AS: ) in a note.
“It seems too soon to make that statement, given persistent inflation fears and the risks — as we’ve seen over the past 12 months — that the Fed cycle will appreciate further.”
Traders are now focused on the release of the April report, and economists expect some 400,000 jobs to have been created last month, a strong report that would not undermine the case for aggressive monetary policy tightening. given that inflation is at a four-decade high.
This stance by the Fed is putting pressure on other central banks, as the head of Germany’s Ifo institute declared on Friday that the European Central Bank should rapidly raise interest rates in line with those in the United States, given high inflation in the euro zone.
This statement comes after Fabio Panetta, known for his prudence, acknowledged Thursday in a newspaper interview that neither negative interest rates nor quantitative easing are appropriate at the moment.
However, the pair is down 0.4% to the 1.0494 level, holding slightly above five-year lows hit last week at 1.0469.
“The problems in both Europe and China create many obstacles for the procyclical euro,” adds ING. “The balance of risks suggests that it is difficult to argue for a significant rally in EUR/USD.”
He also raised his benchmark interest rate by 25 basis points on Thursday, marking his fourth consecutive meeting with such a move. However, the pair slumped more than 2%, its biggest daily drop since 2020, after the central bank warned the economy was at risk of recession, and the pair has currently lost a further 0.6%, up to the level of 1.2294.
Elsewhere, the pair is up 0.3% to the 130.56 level, coming close to last week’s 20-year highs seen at the 131.25 level, while the pair trails a 0.5% to 0.7072, bucking the week’s trend after the Australian central bank raised rates more than expected and signaled further moves ahead.
The pair is up 0.4% to 6.6819, approaching 18-month highs, after China’s top leaders strongly supported the country’s COVID-Zero strategy, suggesting that it is likely that strict COVID lockdown measures remain in place for the foreseeable future, which could hamper efforts to boost economic growth.