Dollar Slips, Euro Above Parity
On Wednesday, the euro moved higher, staying just over parity with the US dollar, as traders focused on US data due later in the afternoon, which is likely to show inflation at a 40-year high.
European stock markets were in the red, and the dollar index was down 0.2 per cent on the day at $107.93. The euro was trading at $1.00595, up 0.2 per cent on the day.
On Tuesday, the euro fell as low as $1.00005 on the most widely used Electronic Broking Services (EBS) trading platform, while it briefly reached $1 on Reuters trading.
Market participants were looking forward to the release of U.S. CPI data later in the session. Economists predict that headline U.S. inflation will reach a four-decade high of 8.8 per cent in June.
Higher-than-expected inflation would boost expectations of Fed rate hikes and push the currency higher, potentially pushing the euro-dollar to break parity. However, traders will be watching for signals that inflation has peaked, as this could persuade the US Federal Reserve not to be as aggressive in future rate hikes.
The euro has been down about 12% this year and hit a 20-year low on Tuesday as the Ukraine conflict has produced an energy crisis that has harmed the continent’s growth prospects.
Germany Enters the Phase Two of the Gas Plan
Germany has advanced to the second step of a three-tier emergency gas plan. It warned of a recession in case of Russian gas flow disruption. The pound was up 0.3 per cent against the dollar, trading at $1.1923.
The British economy gained unexpectedly in May, led by an increase in local medical appointments and growth in other sectors, albeit consumer-facing services declined somewhat as prices rose. Eurozone industrial production climbed more than predicted in May.
The Japanese yen was a tad lower against the US dollar, trading at 137.02, after taking a beating in recent months as a result of the Bank of Japan’s ultra-easy monetary policy, which has made it an outlier among major global central banks.
The Australian dollar, which is regarded as a liquid barometer for risk appetite, was up 0.6 per cent at $0.6795.
