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

Dollar at one-month low as Lagarde comments lift euro

Published 24/05/2022, 03:27
Updated 24/05/2022, 21:05
© Reuters. FILE PHOTO: U.S. dollar banknotes are displayed in this illustration taken, February 14, 2022. REUTERS/Dado Ruvic/File Photo

© Reuters. FILE PHOTO: U.S. dollar banknotes are displayed in this illustration taken, February 14, 2022. REUTERS/Dado Ruvic/File Photo

By John McCrank

NEW YORK (Reuters) - The U.S. dollar index hit nearly a one-month low on Tuesday after European Central Bank President Christine Lagarde said euro zone interest rates will likely be in positive territory by the end of the third quarter, giving the euro a boost.

Lagarde's comments implied an increase of at least 50 basis points to the ECB deposit rate and fueled speculation of bigger hikes this summer to fight a surge in inflation tied to rising energy prices caused by the war in Ukraine and massive public-sector stimulus after the onset of the coronavirus pandemic.

The euro was up 0.42% at $1.07355 at 3:25 p.m. EDT (1925 GMT). Over the past seven trading sessions, the single currency has rebounded 3.7% after having fallen to its lowest level since January 2017, at $1.0349, earlier this month.

"They were a little bit late in the party, in comparison to the Fed," John Doyle, vice president of dealing and trading at Monex USA, said of the ECB.

"But if you're going to see them try to catch up a bit to our tightening cycle over here, then that differential that the dollar has enjoyed between the Fed and the ECB has tightened a bit and that's why you've seen the euro get some relief from those multi-year lows," he said.

In the United States, most of the foreseeable monetary policy tightening by the Federal Reserve has likely been priced in already, said Marshall Gittler, head of investment research at BDSwiss.

"This difference in expectations could propel EUR/USD higher still over the next several sessions as the market has only recently begun to reprice this differential," he said.

Minutes from the Fed's May 3-4 policy meeting are due to be released on Wednesday.

Against a basket of other major currencies, the dollar was down 0.372% at 101.76, its lowest level since April 26.

The greenback weakened further after data showed U.S. business activity slowed in May as higher prices cooled demand for services while renewed supply constraints because of COVID-19 lockdowns in China and the war in Ukraine hampered production at factories.

S&P Global (NYSE:SPGI) said its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, showed the pace of growth was the slowest in four months.

© Reuters. FILE PHOTO: U.S. dollar banknotes are displayed in this illustration taken, February 14, 2022. REUTERS/Dado Ruvic/File Photo

Sterling fell against the U.S. dollar after PMI data showed that momentum in Britain's private sector slowed much more than expected this month, adding to recession worries as inflation pressures ratcheted higher. The British pound was down 0.48% at $1.2525.

The risk-sensitive Aussie dollar dipped 0.2% to $0.70965. The New Zealand dollar was 0.39% weaker at $0.64425, a day before the country's central bank is widely expected to raise its key interest rate by half a percentage point. 96284aac-4f75-4305-a55b-d88c4a62460b2

Latest comments

Higly likekly it will not. Market manipulation with bla bla bla. Investors know real situation and it is very bad.
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.