Investing.com – The U.S. dollar rose in European deals on Thursday following hawkish comments from a Federal Reserve official, while weak economic data weighed on the euro and sterling.
At 05:30 ET (0930 GMT), the dollar index, which tracks the dollar against a basket of six other currencies, was trading 0.3% higher at 104.320, near its highest level since mid-February.
The dollar strengthened thanks to Waller’s comments
The dollar was in demand after Fed Chairman Christopher Waller said in a speech at a meeting of the Economic Club of New York late on Wednesday that recent disappointing inflation data bolstered the case for the US central bank holding off on cutting its rates in short term. term.
“There is no need to rush to cut the policy rate now,” Waller said, as the latest data “tells me that it is prudent to keep the rate at its current restrictive level, perhaps longer than previously thought, to help keep inflation on a sustainable path.” towards 2%.”
“The speech disappointed dollar bears, who may have been hoping for some reassuring confidence in the deflation process and further discussion of seasonal issues with hard January inflation data,” ING analysts said in a note.
There’s more economic data to digest on Thursday, including weekly data, fourth-quarter data and .
Much of the focus, however, will be on Friday’s release of the Fed’s favorite inflation gauge when the market closes on Good Friday.
Sterling and the euro collapse
In Europe, the index fell 0.3% to 1.0789, near its lowest level in five weeks, after data released earlier on Thursday showed the index unexpectedly fell 1.9% from February , illustrating the difficulties Europe’s largest economy faced in the first quarter.
European Central Bank officials have become very dovish of late, with board member Piero Cipollone the latest to hint at cutting interest rates as early as June.
“Wage growth appears to be gradually slowing over the medium term to a level in line with our inflation target and productivity growth as forecast,” Cipollone said at an event in Brussels on Wednesday.
“As our confidence grows in inflation approaching our target on time, it also strengthens the case for adjusting our interest rates,” Cipollone said.
fell 0.3% to 1.2603 after data confirmed the UK economy entered a shallow recession last year.
The country’s economy contracted 0.1% in the third quarter and 0.3% in the fourth, unchanged from preliminary estimates, marking two consecutive quarters of negative growth.
The British economy showed signs of starting 2024 on a stronger footing, with monthly GDP growth of 0.2% in January, but with inflation slowing, the Bank of England is getting closer to the point where it could start cutting rates.
Yen on guard for intervention
traded 0.1% higher at 151.41 after soaring to 151.97 on Wednesday, its strongest level since mid-1990.
Japanese authorities held a meeting on Wednesday to discuss the currency’s weakness and stepped up their verbal warnings, meaning speculation is rife that intervention is close.
Japan intervened in the foreign exchange market three times in 2022, selling the dollar to buy the yen, first in September and then in October when the yen fell to a 32-year low of 152 per dollar.
rose 0.1% to 7.2295, with the pair remaining well above the 7.2 level, even as the People’s Bank of China set a much higher-than-expected midpoint to stem further yuan losses.