Breaking News
Investing Pro 0

Dollar edges higher as traders await U.S. inflation report

Forex Aug 09, 2022 20:55
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. U.S. Dollar banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration

By John McCrank

NEW YORK (Reuters) - The safe-haven dollar edged higher on Tuesday, erasing earlier losses as risk appetite dwindled ahead of key inflation figures that could offer clues on how aggressive the Federal Reserve will be in its expected interest rate hike in September.

{{2126|The dodollar index, which measures the currency's value against a basket of peers, was up 0.047% at 106.38 at 3:15 p.m. Eastern time (1915 GMT).

The greenback had drifted lower in thin summer trading from the start of the session, but then reversed course as U.S. stock markets slid on profit warnings, global inflationary concerns, and data that showed U.S. worker productivity fell sharply in the second quarter.

"There's a lot of global issues and we cannot ignore them and that puts a lot of downward pressure on global growth," Juan Perez, director of trading at Monex USA said of the dollar's safe haven appeal.

The big focus for traders is on Wednesday's U.S. Consumer Price Index report, which is expected to show that decades-high inflation eased in July following back-to-back 75-basis point hikes by the Fed in June and July.

But data on Friday showed that U.S. employers hired far more workers than expected last month, with wages still rising at a strong clip, boosting bets for another mammoth rate hike by the Fed at its Sept. 20-21 meeting.

Money-market futures show traders see about a two-thirds chance of a 75 bps hike next month.

"We've been getting consistently hotter-than-expected inflation reports and if that happens again, the market is not prepared for that," said Edward Moya, senior market analyst at Oanda. "If that happens, we're testing parity again against the euro," he said of the potential for more dollar strength.

The euro was up 0.2% at $1.0204, sterling dipped 0.12% to $1.2065. Versus the yen, the dollar was fell 0.14 at 135.195 yen.

Economists polled by Reuters see year-on-year headline inflation at 8.7% - relatively high, but below last month's 9.1% figure. The Fed targets inflation at 2%.

Heightened expectations for aggressive near-term hikes, have pushed short-dated Treasury yields further above long-term peers.

The gap between two and 10-year Treasury yields, a reliable recession indicator, has grown to its largest in two decades. [US/]

"The U.S. yield curve is inverted, suggesting recession down the line. But equity markets look as if they believe the Fed is going to stop soon and start cutting in 2023," said Mizuho senior economist Colin Asher.

"I think tomorrow's CPI data will suggest the Fed is not going to stop, which to me suggests weaker equity markets ahead which will limit any dip in the dollar in the next few months."

The dollar's safe haven status, though, makes the greenback's reaction a little harder to predict, especially as growth and geopolitical worries swirl.

China extended military drills near Taiwan, and the self-ruled island's foreign minister said China was using the drills launched in protest against U.S. House Speaker Nancy Pelosi's visit as an excuse to prepare for an invasion.

Elsewhere, Australia's dollar, viewed as a barometer of market risk, dropped 0.41% to $0.6955 and New Zealand's dollar slid 0.14% to $0.62765.

Dollar edges higher as traders await U.S. inflation report
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
Exousia Mobile Studio
Exousia Mobile Studio Aug 09, 2022 22:50
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Hmmm looking towards the CPI Inflation report
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email