The euro strengthened 1% to $1.0747, its highest level against the dollar since June 9, adding to Friday’s 1.2% appreciation.
Sterling gained 0.9% to $1.2197 against the dollar, taking advantage of Friday’s 1.5% rally, while the Swiss franc added 0.8% to $0.92, its highest level since early March.
The movements on Monday extended the downward trend of the dollar, which in the last three months of 2022 registered its biggest quarterly loss in 12 years. The decline was prompted in large part by investor sentiment that the Fed will not raise rates beyond 5%, from its current range of 4.25%-4.50%, as inflation and growth cool. .
“The Fed will take last week’s data as positive, an affirmation that its rate hikes are starting to have the desired effect, even if the job market remains strong.”said Richard Flax, Moneyfarm’s chief investment officer.
Two reports released Friday painted a picture of a growing economy and a strong job market, but at the same time general activity is tipping into recession territory, leading traders to sell dollars against a variety of currencies.
The monthly employment report on Friday showed an increase in the number of workers on nonfarm payrolls and a slowdown in wage growth, good news for the US central bank.
Another report from the Institute for Supply and Management (ISM) showed service sector activity contracted in December for the first time in two and a half years. The ISM non-manufacturing PMI stood at 49.6, its weakest reading since 2009, excluding the crash during the 2020 pandemic.
The dollar index traded at a seven-month low and was later trading down 0.2% at 103.54. The index, which compares the dollar against six currency pairs, fell 1.15% on Friday as investors turned in favor of riskier assets.
The outlook for price pressures remains in the spotlight for investors, with consumer inflation data set to be released this week.
The Federal Reserve raised interest rates by 50 basis points last month, following four consecutive 75 basis point hikes last year, but said it would probably keep them higher for longer to control inflation.
Source: Ambito
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