Currency: focus shifts to dollars

ABM
Friday, June 10, 2022 11:22

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The euro traded just above $ 1.06 on Friday after the European Central Bank failed to deliver what the market had priced on Thursday, shifting focus to the dollar with US inflation data today and the Federal Reserve’s interest rate decision on the agenda next week.

“This is probably not the end of the depreciation of the euro against the dollar,” ABN AMRO currency specialist Georgette Boele told ABM Financial News on Friday.

ABN AMRO has revised its view of the ECB and now expects the central bank to raise interest rates by 25 basis points at each meeting from July this year, so that the deposit rate will be at least 0.75 percent by the end of February 2023. ” “The size of the rate hike was still open for September. It depends mainly on the inflation trend at that time,” says Boele.

The bank also expects the Federal Reserve to raise interest rates by 50 basis points at each meeting this year and in February next year. That would bring the upper limit of the so-called Fed Funds rate to 4 percent. “However, we expect inflation to fall markedly during 2023, paving the way for interest rate cuts in the second half of 2023,” Boele said.

“The market has priced an interest rate for the end of February 2023 of 3 percent for the Fed and 1 percent for the ECB. So we expect more interest rate hikes than the Fed market and slightly fewer interest rate hikes than the ECB market,” said the currency specialist.from ABN AMRO on Friday .

“We are not anticipating a recession in the United States at present, but a significant weakening of the underlying demand in terms of consumption and investment, which would increase the risk of a recession,” Boele said.

The expectation that the Fed will be more active in monetary policy than the ECB would normally result in a stronger dollar against the euro this year, according to ABN AMRO. ‘ “On the other hand, the dollar could become a safe haven if these aggressive rate hikes provoke more than just recession fears and lead to market panic. In such an environment, the focus shifts from interest rate differentials to Liquidity and the dollar is the ultimate safe harbor currency,” Boele said.

ABN AMRO will soon revise its currency estimates, with the euro still expected to reach $ 1.05 by the end of this year and $ 1.10 by the end of 2023.

US inflation in May is expected to rise by 0.7 per cent, compared with a plus of 0.3 per cent on a monthly basis in April. Excluding energy and fresh food components, lunar prices are expected to rise 0.5 percent from 0.6 percent in April. Annual inflation is expected to be 8.3 percent, up from April, and core inflation at 5.9 percent from 6.2 percent year-on-year in April.

In addition to these data, preliminary U.S. consumer confidence for June, measured by the University of Michigan, will follow in the second half of the afternoon.

Today’s speaker is also ECB President Christine Lagarde, who will take part in the 20th anniversary of the Department of Rent and Finance at Goethe University. The chairman of the Deutsche Bundebank Joachim Vogel is also visiting a university, in this case Baden-Württemberg, which is speaking.

The euro traded unchanged at $ 1.0616 on Friday. The European currency was 0.1 per cent higher at 0.8505 British pounds. The British pound fell 0.1 percent on Friday to $ 1.2483.


The ABN AMRO share price is listed live at € with a difference of † Today’s highest price is € with the low of €


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