The dollar crept higher on Thursday, aided by risk aversion following poor data from Meta Platforms, the parent company of Facebook (NASDAQ: FB). However, the attention will be on central bank meetings in the United Kingdom and Europe. The Dollar Index, which monitors the greenback against a basket of six other currencies, rose 0.2 percent to 96.095 at 2:55 a.m. ET (0755 GMT).
After Meta Platforms posted poor profits and a negative outlook, causing a selloff in internet and social media companies, the dollar, which is considered a safe haven in times of stress, has gained some support.
The Australian and New Zealand dollars, both risky currencies, underperformed, with the AUD/USD down 0.2 percent to 0.7119 and the NZD/USD falling 0.1 percent to 0.6622.
The dollar index is up 0.5 percent so far this year, after climbing about 7% in 2021, its strongest year since 2015, as the Federal Reserve gradually phased up its exceptional pandemic-era monetary support for the economy. According To a survey of strategists, the US dollar should reign supreme for at least another 3 to 6 months. However, it will take a dramatic shift in market expectations for Federal Reserve rate rises to propel it higher.
Central Banks Responds
The Bank of England and the European Central Bank, away from the Fed, will release policy decisions at 7 a.m. ET (1200 GMT) and 7:45 a.m. ET, respectively. Meanwhile, ECB President Christine Lagarde will hold a press conference at 8 a.m. ET. Before the Bank of England meeting, the GBP/USD slipped 0.2 percent to 1.3550. After a 15 basis-point rise in December, the central bank should give the first back-to-back interest-rate hikes since 2004; with inflation at a three-decade high.
“The market will be keen in reading if the BoE still believes CPI will be over the 2 percent goal in 2-3 years’ time – even with all the tightening built-in,” analysts at ING said in a note.
Inflation is also a problem in the Eurozone. Statistics released on Wednesday revealed that consumer prices unexpectedly rose by 5.1 percent in January; more than above the ECB’s objective of 2 percent. The unexpected result was partly attributable to a Monday inflation overshoot in Italy.
Investors will pay close attention to President Christine Lagarde’s press conference for any changes in the forecast for the ECB’s bond-buying program, which will continue in a reduced form even after the emergency pandemic program expires in March.
In other news, the USD/JPY gained 0.1 percent to 114.59 after Japan’s services sector activity shrank at its sharpest rate in five months in January. PMI fell to 47.6 from 52.1 the previous month and a flash reading of 48.8.
COVID-19 instances have risen sharply in the world’s third-largest economy in recent weeks. This leads the authorities to impose stricter controls over most of the country.
Interested in Forex Trading? Read WiBestBroker’s comprehensive Soltechx Review.
COMMENTS