Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Dollar Edges Lower But Well Supported on Rise in Risk Aversion

Published 21/01/2022, 08:20
Updated 21/01/2022, 08:20
© Reuters.

© Reuters.

By Geoffrey Smith 

Investing.com -- The dollar edged lower in early Friday dealings in Europe but remained well supported after another sharp selloff in U.S. equities on Wednesday damped risk appetite around the world.

By 3 AM ET (0800 GMT), the dollar index, which tracks the greenback against a basket of advanced economy currencies, was down 0.1% at 95.67, but was still on course for a gain of around 0.5% over a week that has been dominated by fears of inflation, higher interest rates and, latterly, signs of a soft patch for the U.S. economy due to the Omicron variant of Covid-19.

Initial jobless claims surged to their highest level in three months last week, while earnings disappointments from the banking sector and, on Thursday, Netflix (NASDAQ:NFLX) have cast doubt on the prevailing growth narrative of the last couple of years.

Geopolitical concerns are also keeping risk appetite limited, with U.S. President Joe Biden warning on Wednesday that he expects Russia to invade neighboring Ukraine again. Secretary of State Anthony Blinken meets with his Russian counterpart Sergey Lavrov for talks later Friday to defuse the situation. The Russian ruble was unchanged at 76.64 to the dollar but is down over 3.5% this week.

The European day got off to a gloomy start, as the U.K. recorded a sharp drop in both retail sales and consumer confidence, amidst surging Covid cases and household energy costs. The GfK confidence index fell to its lowest level since February while retail sales fell 3.7% on the month in December. November's figures were also revised down. 

Analysts said the figures likely reflected a change in spending patterns due to the pandemic, with consumers having completed their Christmas shopping earlier than usual due to fears of product shortages. October's sales had been exceptionally strong.

"Total consumer spending may not decline this year, given high savings levels and room for some further catch-up in certain services categories," said ING economist James Smith in a note to clients. "But retail looks more vulnerable, particularly after two years of above-average spending on goods. The latest fall in consumer confidence is a potential warning sign."

The pound fell 0.2% to $1.3565 and was also down 0.4% against the euro in response. The euro, meanwhile, was up 0.2% at $1.1362, having lost 1.5 cents against the dollar in the last week as the gap between ECB policy and that of the Federal Reserve widens. ECB President Christine Lagarde again pushed back against calls for an early rise in interest rates in a keynote speech on Thursday, despite headline inflation running over 5% in the Eurozone, its highest since the creation of the single European currency.

 

 

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.