Home ForexArticles Dollar Soars With US Economy On Solid Ground; Sterling plummets By Investing.com

Dollar Soars With US Economy On Solid Ground; Sterling plummets By Investing.com

by SuperiorInvest

© Reuters

Investing.com – The U.S. dollar rose sharply in European trading on Friday after the Swiss National Bank's surprise cut cast a more hawkish picture from the Federal Reserve.

At 04:00 ET (0900 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was trading 0.4% higher at 104.085, near a three-week high and on track for a second week of gains. .

The US economy on solid footing

They delivered the biggest surprise of a week full of central bank meetings, cutting interest rates and citing the strength of the franc as the reason.

The Swiss franc, the best-performing G10 currency in 2023, fell more than 1% overnight and continued to fall on Friday, rising 0.4% to 0.9009, approaching parity.

This move has led traders to reassess the Federal Reserve's likely future actions, following this week's FOMC meeting, where officials reaffirmed the likelihood of three interest rate cuts this year if economic data allows.

The US central bank also sharply improved its growth outlook for 2024, and data on Thursday suggested the US economy remained on solid footing after the number of Americans filing for unemployment benefits fell unexpectedly last week, while used goods sales rose by the most in a year in February.

This suggests that the Federal Reserve does not need to be in a rush to cut rates in the future.

That said, “the dollar's jump appears exaggerated,” ING analysts said in a note.

“The Federal Reserve sent a pretty clear message earlier this week: some resilience in activity data will not be a barrier to cuts as long as inflation shows downward momentum.”

BOE rate cut expectations not 'unreasonable'

In Europe, it fell 0.5% to 1.2588, falling to a one-month low after left-wing interest rates were left unchanged on Thursday, but two MPC members abandoned their calls for a rate hike. rates due to the relaxation of inflation.

Expectations of interest rate cuts this year were not “unreasonable”, Bank of England Governor Andrew Bailey reported in the Financial Times on Friday.

“Markets are largely interpreting this as a recognition that cuts are not too far away,” ING added, and is now increasingly convinced that the Bank of England will begin to ease its monetary policy in June (20 basis points already discounted), in addition to beginning to speculate on a measure in May (7 basis points). price).”

was trading 0.4% lower at 1.0814, and eurozone activity data continues to paint a gloomy picture for the region's manufacturing prospects.

The European Central Bank could be in a position to cut interest rates before the summer recess, possibly in June, as inflation is returning to the bank's target of 2%, Bundesbank President Joachim Nagel said on Friday.

The comments add Nagel to a long list of policymakers apparently backing a June cut and suggest the ECB will be the second major central bank, after its Swiss counterpart, to begin unwinding a record series of rate hikes.

Yen nears four-month low

traded slightly lower at 151.59, near its highest level in four months, with the yen suffering heavy losses overnight.

rose 0.2% to 7.2297, crossing the 7.2 level for the first time since November 2023, following reports that the People's Bank of China was selling dollars and buying yuan on the open market to support the currency China.

fell 0.8% to 0.6515, and risk sentiment took a hit.

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