Unlock Premium Data: Up to 50% Off InvestingProCLAIM SALE

Dollar steadies after sharp gains post Fed minutes; sterling retains strength

Published 2024/05/23, 10:28
© Reuters
EUR/USD
-
GBP/USD
-
USD/JPY
-
USD/CNY
-

Investing.com - The U.S. dollar handed back some of the previous session’s gains Thursday, but remained near a one-week high after the release of hawkish minutes from the last Federal Reserve meeting suggested U.S. interest rates would remain elevated for some time. 

At 04:20 ET (08:20 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% lower at 104.705, after gaining 0.3% overnight.

Dollar boosted by hawkish Fed minutes

The minutes of the Fed’s late-April meeting showed policymakers were growing increasingly concerned over sticky inflation, with some Fed officials talking about potentially raising rates further to bring down inflation.

“While the general view was that policy was ‘well positioned’, many members were open to more hikes if needed. Incidentally, ‘many’ participants questioned whether policy was restrictive enough,” said ING in a note.

Several Fed officials have subsequently cautioned about inflation levels in speeches following the gathering.

But the Fed is still seen as unlikely to raise interest rates further, and so markets are now pricing in a greater chance the central bank will keep rates high for longer. 

Atlanta Fed Chair Raphael Bostic is set to speak later in the session, and traders will look to his comments as well as manufacturing activity data for May for further clues.

Sterling retains firm tone after election news

In Europe, GBP/USD rose 0.1% to 1.2730, with sterling retaining its firm tone after Wednesday’s data showed that U.K. inflation fell by less than expected in April.

Prime Minister Rishi Sunak called a national election, which his Conservative party is widely expected to lose to the opposition Labour Party after 14 years in power.

“The pound also seems to have been only very lightly impacted by the news,” said ING, as “crucially, many of the volatility-inducing events that had been associated with UK politics in previous years (UK-EU trade relationships, unfunded budget spending, the Scottish referendum) all seem to be rather marginal risks now.”

EUR/USD traded 0.2% higher to 1.0839, after data showed that eurozone business activity has expanded at its fastest pace in a year this month.

HCOB's preliminary composite Purchasing Managers' Index climbed to 52.3 this month from April's 51.7, beating expectations for a more modest lift to 52.0, supported by buoyant demand for services, while the manufacturing sector showed signs of approaching a recovery.

The European Central Bank has largely confirmed it will start its rate-cutting cycle next month, and the current debate is how many more cuts, if any, the policymakers will agree to this year.

Yen flat despite PMI improvement

In Asia, USD/JPY largely flat at 156.76, after surging close to 157 in overnight trade, with PMI data for Japan showing manufacturing activity expanded for the first time in 11 months. 

USD/CNY traded 0.1% higher at 7.2443, trading just below a six-month high.

Beijing was seen banning certain U.S. firms from participating in trade activity relating to China, while also banning some arms shipments to Taiwan. The move was seen as retaliation for steeper U.S. tariffs on key Chinese industries, which will go live from August 1.

China also carried out military drills near Taiwanese territory, ramping up concerns over heightened tensions in the area.

 

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.