By Peter Nurse
Investing.com – The dollar gains ground on Wednesday on expectations of an aggressive tightening of monetary policy by the Federal Reserve, while the euro is affected by the prospect of new sanctions on Russia.
At 9:00 AM ET, the , which tracks this coin against a basket of six other majors, is up 0.2% at 99.640, just below its highest level since May 2000.
The statements of the governor of the Federal Reserve, Lael Brainard, who is awaiting confirmation as vice president of the United States central bank, contributed to the strengthening of the dollar by calling for the rise in interest rates and the rapid reduction of the balance of the Federal Reserve to bring US monetary policy to a “more neutral stance” later this year.
“I think we all absolutely agree that inflation is too high and curbing it is of the utmost importance,” Brainard told a Minneapolis Fed conference.
Brainard is normally seen as fairly dovish, and his remarks have sent US bond yields soaring, pushing benchmark bond yields to their highest since March 2019.
The Fed raised interest rates by 25 basis points last month, its first hike since 2018, and expectations have been built that the central bank will act more aggressively at its May meeting.
Statements from last month’s Fed meeting are due out this Wednesday, and traders will be parsing his words carefully for any guidance on what policymakers plan to do next.
Elsewhere, the pair is down 0.2% to 1.0884, hitting almost one-month lows, as the United States, the European Union and the Group of Seven coordinate to impose a new round of sanctions. to Russia, including a ban on investment in the country by the United States and a ban on imports by the EU.
“The behavior of the euro is intrinsically linked to the content of the new sanctions that the EU seems to be imposing on Russia; the greater the implications for the energy market, the greater the impact on the euro”, say analysts at ING (AS 🙂 in a note.
The pair is up 0.3% to the 123.91 level, approaching again the almost seven-year high reached in March at 125.10, and the widening gap between US and Japanese bond yields has weighed on the yen
He is down 0.1% to 1.3062 while he is holding steady at the 0.7580 level, extending Tuesday’s gains after he signaled an interest rate hike was imminent.
The is up 0.2% to 4.2671, and the is up 0.1% to 4.6467 ahead of the latest Polish central bank meeting this Wednesday and in which is expected to raise interest rates for the seventh consecutive time to counter rising inflation.