As traders reduced expectations that the U.S. Federal Reserve will raise interest rates by a full percentage point this month, the U.S. dollar slipped down in early European trade on Tuesday, coming near a one-week low.
The Dollar Index measures the dollar’s value against six other currencies. It traded 0.2 percent down at 107.045 at 2:55 AM ET (06:55 GMT), off Monday’s low of 106.88 but still far from the recent high of 109.29, a level not seen since September 2002.
The Committee has entered its blackout period, so there are no speakers until next week. Second, the U.S. data flow should be mostly in the second tier this week, according to analysts at ING. They doubt that between now and the 27 July FOMC meeting, markets will seriously reconsider a 100bp increase. Before the European Central Bank meeting on Thursday, where officials should start Europe’s hiking cycle with a 25-basis point hike, the EUR/USD eked out a 0.3 percent gain to 1.0169.
Uncertainty In the EU After Ukraine Crisis
On the other hand, political unrest is still pervasive in Italy, where highly regarded Prime Minister Mario Draghi is scheduled to address MPs on Wednesday and announce his desire to either form a new coalition or leave the government. In addition, following a stoppage for planned maintenance, Russia will stop sending gas to Western Europe via the Nord Stream pipe on Thursday. Suppose Moscow decides to extend the outage for political reasons while the conflict in Ukraine continues. In that case, the euro is likely to come under pressure.
Early in July, the central bank increased interest rates by 50 basis points to 1.35 percent, marking the third increase in as many months. With the Bank of Japan meeting on Thursday and the People’s Bank of China meeting on Wednesday, the USD/JPY declined by 0.3% to 137.75 while the USD/CNY increased by 0.1% to 6.7477.
GBP/USD increased 0.2 percent to 1.1978, bouncing back from a late-week low of 1.1761 for the first time since March 2020, as Britain prepared for a contentious election to succeed ousted Prime Minister Boris Johnson.