Support Comes Back For Dollar; Inflation Data Expectations Impact Euro
The US dollar (USD) found a strong and firm footing in the Thursday trading session. The value of the dollar went up against the major currencies due to strong input from the traders.
On the other hand, the value of the euro experienced a downtrend and that was because of the inflation data that is to come out for the Eurozone.
As per the economists, it is the key inflation data for the entire European region, giving a better idea of where the economy stands.
With the traders not making any move against the euro in the latest forex sessions, the trading price of the euro has edged lower.
Performance of the DXY
The latest US dollar index has recorded a significant pump compared to the previous trading sessions. The report shows that the value of the dollar against the major currencies is 104.737.
It has reportedly reached this level after getting pushed by 0.3%. Because of the latest session, the value of the dollar has come close to hitting a two-month high trading level.
One of the main factors the value of the greenback has rebounded is because of the US Treasury yields. The US Treasury yields have been pushed higher and this is what is supporting the greenback’s gain momentum.
Due to the developments of the US Treasury yields, the losses that the dollar incurred have been brushed off. Now the dollar is moving in the straight direction making things much more convenient for traders.
Comments from Neel Kashkari
The President of the Federal Reserve Bank of Minneapolis made a suggestion about interest rate hikes.
Kashkari made a suggestion about the increase in interest rates. As per him, the interest rates must be kept at a high of 50 bps. This is the only way for the US government to fight off rising inflation.
It may seem that the interest rate hike policy is failing against the rising inflation rates. In reality, this is the monetary policy that has kept the inflation rates at a bay.
The Feds are expected to have a meeting towards the end of March about the interest rate hikes. There is a very high chance that the Feds will stick with the 50 bps interest rate hikes.
It is important to keep increasing the interest rates until the situation gets better and the inflation rates come under control.
He even shared the possibilities pertaining to the under-tightening and over-tightening of the policies. He stated that both approaches pose high risks to the country’s economy.
However, with under-tightening, they are able to bring the inflation rates under control. This is what brings under-tightening into the positive territory for the economy.
On the other hand, over-tightening is not going to help them control the inflation rates as much as they are controlled with the first approach.
Kashkari predicted that they have to do more than what they have been doing in order to control the inflation rates.
The country needs to find economic stability and it is possible only when the inflation rates come under control. They will have to keep increasing the interest rates even if it means breaching the initial predictions.
According to Kashkari, it is important that the interest rates keep on rising, and doing so would eventually push the interest rates over the 5.4% level.
It is highly likely that the overall interest rate increment would go past the 5.4% figure in the month of December 2023.
Euro Price Vs the Dollar
The latest market data has revealed that the value of the euro has plummeted by 0.3% against the dollar. Following the dip, the euro moved down to 1.0633 against the dollar.
Just a day earlier, the euro was 0.9% higher against the greenback. This was the highest figure that the euro had hit against the dollar in a month.