© Reuters.
Por Peter Nurse
Investing.com – The US dollar lost ground at the start of trading in Europe this Friday, falling to a one-month low on growing expectations that the Fed’s tightening cycle could be relatively short.
At 9:55 AM ET, the , which tracks this currency against a basket of six other major currencies, is down 0.2% at 101.650, nearing the lowest level recorded since April 25. and on track for a drop of about 1.5% this week.
Furthermore, the pair is up 0.2% to 1.0742, the is up 0.2% to 1.2621, with both pairs reaching levels not seen since late April, while the , highly risk sensitive, is up 0.4% to 0.7128 and 0.4% to 0.6505.
The dollar hit a 20-year high at the start of the month, but retreats on signs that tightening monetary policy may be holding back economic growth.
Data released on Thursday showed that the US economy contracted slightly more than initially estimated in the first quarter of the year, as the shrank at a 1.5% annualized pace, despite the preliminary reading that pointed to 1.4%.
In addition, the Fed’s early May meeting notes, released on Wednesday, indicated that central bank policymakers may be willing to slow or even pause their tightening cycle in the second half of the year if levels of inflation begin to recede.
Attention will now focus on the publication of the {{ecl-906||Personal Consumption Expenditure Price Index}, to be published on Friday, being the version of this index, which excludes volatile elements such as food and energy , the Fed’s main gauge of inflation. This index is expected to fall to an annualized 4.9% in April, from 5.2% in the previous month.
“The Fed’s tightening cycle price has corrected 25 to 35 basis points lower since early May,” ING (AS:) analysts note in a note, “but the Fed’s speech and agenda Data out of the US suggests that higher levels of the Fed’s terminal rate could easily return to the market, supporting the dollar.”
Elsewhere, the pair is up 0.1% at 16.3826 after Turkey’s central bank decided to leave interest rates unchanged for a fifth month on Thursday, making rates deeply negative if you take into account inflation.
This has weighed on the lira, to the point that the Turkish currency is the worst performer in emerging markets so far in 2022, down nearly 19% against the dollar.
The pair slipped to 6.7379 after Chinese corporate industrial profits declined last month for the first time in two years, falling 8.5% in April from a year earlier, as COVID outbreaks and confinement measures have weighed down economic activity.
