2023-07-13 16:02:53
The dollar fell to its lowest level since April 2022 on Thursday (13th), as cooling U.S. inflation boosted expectations that the Federal Reserve will raise interest rates only once this year, thus reducing the greenback’s yield advantage over other currencies.
By the time of writing, the dollar was down 0.51% once morest a basket of six major currencies at 99.685, a 15-month low.dollar indexIt is headed for its biggest weekly drop so far this year.
in addition,EURAppreciated 0.6% once morest the dollar to 1 EURAt $1.1190, it hit a fresh 16-month high earlier in the session and was on track for a sixth straight session of gains, the most since this year.EURIt was the longest streak of gains once morest the U.S. dollar.
The Producer Price Index (PPI) released by the United States on Thursday further strengthened the view that inflation is slowing down. The annual and monthly growth rate of PPI in the month was only 0.1%, and the annual growth rate was the slowest in nearly three years.
At the same time, the Consumer Price Index (CPI) for June released yesterday has preemptively shown that the core inflation in the United States has slowed down much faster than expected. The annual increase in June returned to 3%, and the monthly increase was only 0.2%, which was lower than Market expectations of 0.3%.
Ugo Lancioni, manager of foreign exchange management and investment group at Neuberger Berman in Milan, said that it is clear that the inflation trend is downward, but the question is how long it will last. That reduces the chances of the Fed raising interest rates more than the market expects, which is negative for the dollar.
Interest rate futures showed that the market had fully priced in another rate hike from the Federal Open Market Committee (FOMC) at the end of this month, but expectations of further rate hikes had faded.
Fiona Cincotta, market strategist at City Index, said it remains to be seen whether the dollar will go one-way lower in the second half of the year. Because a lot depends on the news released by the FOMC in the next few weeks, and this will determine the future direction of the dollar and set the tone for the rest of this summer.
Cincotta also said that if there is any sign of dovishness from the Fed, dollar bears will seize on that and it will be an excuse to keep pushing the greenback lower. But she doesn’t think the Fed will signal that July will be the last rate hike.
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