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Dollar edges lower; weekly loss looms on dovish Fed

Forex Nov 25, 2022 02:58AM ET
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By Peter Nurse

Investing.com - The U.S. dollar edged lower in early European trade Friday, on course to post a weekly loss on dovish signals from the Federal Reserve.

At 02:55 ET (07:55 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, fell 0.1% to 105.840, down more than 1% for the week and close to its three-month low of 105.30 hit last week. 

The dollar has struggled of late as expectations of a less aggressive pace of U.S. monetary tightening as soon as next month saw U.S. Treasury yields sink to seven-week lows earlier Friday.

“The Fed minutes surprised on the dovish side, signaling strong support for slower rate hikes and weaker support for Powell's higher-for-longer rhetoric,” said analysts at ING, in a note. “The dollar could stay pressured for a bit longer, but it's probably embedding a good deal of Fed-related negatives now.” 

Activity is likely to be limited Friday, with traders taking advantage of Thursday’s U.S. Thanksgiving holiday to enjoy a long weekend, and attention will quickly shift to next week and the release of U.S. jobs and growth data for interest rate implications.

EUR/USD rose 0.1% to 1.0418, approaching the four-month high of 1.0481 hit last week, helped by data showing Germany's economy grew by a little more than initially thought in the third quarter.

German gross domestic product expanded by 0.4%, rather than the 0.3% reported in its first reading. That left GDP up 1.2% from a year earlier, rather than the 1.1% in the first reading. 

Additionally, market research firm GfK said German consumer confidence posted a second straight improvement for December, while remaining close to an all-time low at -40.2.

GBP/USD fell 0.2% lower to 1.2087, but is still close to the three-month high of 1.2153 hit in the previous session with the pair on track for a near 2% weekly gain.

USD/JPY rose 0.2% to 138.81, after data showed inflation in Tokyo reached a 40-year high in November, heralding more inflationary pressures for the country.

The risk-sensitive AUD/USD rose 0.1% to 0.6765, NZD/USD slipped 0.1% to 0.6257, while USD/CNY rose 0.1% to 7.1574 with the yuan weakening as the Chinese economy struggles with a record-high jump in daily COVID-19 cases, which saw the reintroduction of strict curbs in several major cities.

 
 
 
Dollar edges lower; weekly loss looms on dovish Fed
 

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Comments (2)
Henry Hall
Henry Hall 2 hours ago
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ᴛʀᴀᴅɪɴɢ ᴄʀʏᴘᴛᴏ ᴡɪᴛʜ 𝖡𝖺𝗋𝖻𝖺𝗋𝖺 𝖩 𝖫𝖺𝗐𝗋𝖾𝗇𝖼𝖾 ʜᴀᴠᴇ ᴄʜᴀɴɢᴇ ᴍʏ ʟɪғᴇ ғʀᴏᴍ ғɪɴᴀɴᴄɪᴀʟʟʏ ᴍɪˢғᴏʀᴛᴜɴᴇ, ɪ'ʟʟ ʟɪᴋᴇ ᴛᴏ ɪɴᴛʀᴏᴅᴜᴄᴇ ʏᴏᴜ ᴀʟʟ ᴛᴏ ʜᴇʀ ᴀɴᴅ ʜᴇʀ ˢᴛʀᴀᴛᴇɢɪᴄ ᴍᴇᴛʜᴏᴅ ᴏғ ᴛʀᴀᴅɪɴɢ ᴡᴏʀᴋˢ ᴘᴇʀғᴇᴄᴛʟʏ ᴡᴇʟʟ. ᴍᴇˢˢᴀɢᴇ ʜᴇʀ ᴏɴ Facebook 👉𝗕𝗮𝗿𝗯𝗮𝗿𝗮 𝗝 𝗟𝗮𝘄𝗿𝗲𝗻𝗰𝗲 👈
Isaac Schier
Isaac Schier Nov 25, 2022 4:47PM ET
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Powell is smart enough to shrug off the easing inflation data. He made it clear in the last two fed meetings what he wants to see, Job Data. If job data doesn’t meet data points which sufficiently show a change in trend regarding a cooling in the job maket he will continue to raise, quite simply said in any challenging macroeconomic environment inflation just doesnt go down with a strong labor market. The ecomonc cycle of expansion/ contraction is commonplace but we have to get there and right now we arent there yet.Powell insider David Rubenstein explained the elephant in the room well,“He can’t quite say this, but if the unemployment rate goes up to 4% or 5% or 6%, inflation will [probably] be tamed a bit,” Rubenstein noted. “But he can’t come out and say, ‘I hope the unemployment rate goes up to 6%.’ That doesn’t sound politically very attractive to say that.”
 
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