The ghost of an economic “catastrophe” in the US recedes: the dollar falls and the markets are encouraged

The ghost of an economic “catastrophe” in the US recedes: the dollar falls and the markets are encouraged

He dollar It was trading near its highest level since March on Friday, as optimism about a breakthrough in US debt limit talks and strong economic data reduced the chances of a series of US rate cuts this week. anus.

Democratic negotiators told the president on Friday Joe Biden that they are making “steady progress” in talks with Republicans aimed at avoiding a US default, just days after Biden and top Republican congressman Kevin McCarthy underscored their determination to reach an agreement to raise the cap on government debt of 31.4 trillion dollars.

That alleviated fears of an unprecedented and economically catastrophic default, prompting markets to revise their expectations for how US interest rates could move.

At the same time, data pointing to a still tight labor market, with the number of Americans filing new jobless claims falling more than expected last week, also raised expectations that the Federal Reserve could raise rates. again next month to control inflation.

The dollar index was down 0.2% but hovered near two-month highs, having risen nearly 2.5% in the past two weeks alone, as investors scrambled to reassess their expectations about what might do the central bank below.

Two Federal Reserve officials said Thursday that US inflation does not appear to be cooling fast enough to allow the central bank to pause its tightening campaign.

Money markets show that traders now believe US rates will fall to 4.86% by the end of the year, versus expectations for a drop to 4.25% just two weeks ago, reflecting how expectations have eased. of a wave of rate cuts.

The dollar was down 0.3% at 138.25 yen, after hitting a six-month high of 138.745 yen.

The euro was up 0.2% at $1.0793, just above its seven-week low, while sterling was up 0.1% at $1.243, not far from its one-month low.

By Amanda Cooper, Reuters Agency

Source: Ambito

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