The price of euro/dollar this week has been largely driven by rising natural gas prices, which correlates with a weaker euro due to the region’s reliance on gas for its energy needs. This, coupled with concerns about the global economy, had investors turning to the dollar earlier this week.
“The main driver of dollar weakness overnight has been the temporary easing of global growth concerns,” MUFG analyst Lee Hardman said, citing media reports that Chinese authorities are stepping up lockdown measures. financial support with more funding planned for infrastructure.
Investors have also been bracing for the fed double down on its commitment to curb inflation at its annual meeting in Jackson Hole, Wyoming, where Powell is scheduled to speak.
The dollar index, which measures the performance of the greenback against six currencies, fell 0.2% to 108.39. but it was not far from its maximum since September 2002, at 109.29, which it touched in mid-July.
The euro had gained as much as 0.5% to $1.0033, after hitting its lowest level in 20 years below par this week. It later trimmed its gains to trade 0.1% higher at $0.9978.
“As the summer wraps up, the dollar remains historically strong. The Fed’s rate hikes to fight inflation have favored the USD, especially relative to the slower pace from the European Central Bank (ECB). We continue to wait.” for the euro to move into a range close to parity,” BofA analysts John Shin and Athanasios Vamvakidis wrote in a research note.
“But the risks of further Fed action remain high, as do growing geopolitical concerns centered on energy, gas supply and Europe in the winter, which could mean further downward pressure on the euro“, they added. Their goal by the end of the year is $1.05.
Source: Ambito
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