By Peter Nurse
Investing.com – The US dollar retreated at the start of trading in Europe on Monday, reversing some of last week’s gains at the start of a week dominated by central bank meetings.
At 9:10 AM ET, the , which tracks this currency against a basket of six other majors, is down 0.2% at 97.035, falling from 18-month highs hit on Friday. at 97,441.
The pair is up 0.2% to 1.1166, after falling to 1.1119 on Friday, its lowest level since June 2020. The pair is up 0.2% to the 115.41 level, the is up 0.1% to 1.3422 and the very risk sensitive , soars 0.6% to the 0.7031 level after falling to its lowest level on Friday since July 2020.
Traders are taking profits on Monday after the dollar posted its best week in seven months following comments from Fed Chairman Jerome Powell that suggested the US central bank was considering more interest rate hikes this year aside from the three that had been previously shuffled.
“Due to strong growth, high inflation and a tight labor market, we now believe there will be six rate hikes of 25 basis points each in 2022 instead of four, followed by another four hikes in 2023 and another in 2024.” , say analysts at Berenberg, in a note.
Despite Monday’s weakness, the dollar could continue to rise until after the Federal Reserve starts raising interest rates, according to JPMorgan Chase.
“The market is still going to go into a kind of price discovery mode,” and “typically the peak of the dollar comes about a month or two after the Fed lifts off,” says Daniel Hui, executive director of global strategy. forex at JPMorgan (NYSE:) Securities, in an interview for Bloomberg Television.
However, attention this week will shift somewhat away from the Federal Reserve, as various central bank meetings are scheduled to be held in the coming days to set monetary policy for Australia, the UK and the Eurozone.
He meets Tuesday amid growing expectations that he will take another step toward normalizing monetary policy, possibly announcing the end of his quantitative easing program.
The Bank of England and the European Central Bank will meet on Thursday, but with likely different results. While the ECB does not anticipate any change in monetary policy, everything points to the Bank of England raising interest rates for the second time in less than two months, after inflation reached almost 30-year highs.
“Presumably the inflation forecasts will be revised higher and the market will be interested to know if the Bank of England still believes that the CPI will be above the 2% target in two or three years’ time, even with all the expected adjustments,” analysts at ING (AS:) said in a note.