Dollar Strengthens as Powell Points to Hike; Euro Slumps

By Peter Nurse

Investing.com – The U.S. greenback remained sturdy, whereas the euro traded close to a 21-month low, with the battle in Ukraine more likely to weigh on European development whereas the Federal Reserve traces up rate of interest hikes. 

At 2:55 AM ET (0755 GMT), the , which tracks the dollar towards a basket of six different currencies, traded 0.1% larger at 97.525.

fell 0.2% to 1.1097, simply above its in a single day low of 1.1058, the weakest since Might 2020, and down 1.5% for the week to date.

rose 0.2% to 115.72, edged larger to 1.3406 and climbed 0.3% to 0.7319, climbing to a brand new seven-week excessive with the Australian economic system seen benefiting as costs for its commodity exports soar.

Federal Reserve Chair Jerome Powell acknowledged on the primary day of his two-day testimony to Congress that he was nonetheless snug with supporting an rate of interest improve of 25 foundation factors on the central financial institution’s subsequent assembly later this month, prioritizing the combat towards inflation over the dangers from Russia’s invasion of Ukraine.

Whereas his remarks successfully take a half-point hike off the desk when the central financial institution meets in the midst of March, that is nonetheless more likely to put the Fed a number of months forward of the European Central Financial institution even earlier than the probably influence of the Ukraine battle is accounted for.

“The macro dent from Putin’s battle will clearly price Europe much more closely than the U.S.,” analysts at ING mentioned, in a word. “The relative insulation of the US economic system is permitting the Fed to stay in hawkish temper and doubtless have probably the most explanation for any to stay to tightening plans.” 

Eurozone soared to a different file excessive in February, climbing to five.8% on an annual foundation from 5.1% the earlier month, knowledge from Eurostat confirmed on Wednesday.

These figures illustrated the dilemma for the European Central Financial institution, as fears are rising that the Ukraine battle will stifle development within the area however gas even larger inflation as a result of provide disruptions, creating the dreaded stagflation. 

That mentioned, ECB Chief Economist Philip Lane mentioned late Wednesday that the central financial institution is intently monitoring the financial penalties of the battle in Ukraine and can do no matter’s essential to assist the continent’s rebound.

Elsewhere, the ruble is constant to hunch as Russian residents attempt to ditch the forex, prompting the nation’s central financial institution to impose a 30% fee on overseas forex purchases by people on forex exchanges, Reuters reported, citing a letter from the regulator. 

traded 3.8% larger at 110.0261, close to a brand new file excessive.

Lastly, fell 0.1% to 1.2614, after the raised its benchmark rate of interest to 0.5% from a record-low 0.25% on Wednesday, climbing for the primary time since October 2018, and indicated it could must go larger to sort out inflation.