He dollar It fell slightly from nearly three-month highs on Thursday, a day after a surprise Bank of Canada rate hike suggested the Federal Reserve may also have more work to do in its fight against inflation.
The euro was up 0.3% at $1,073, the most traded currency pair on world markets. This is despite the data showing that the euro zone economy entered a mild recession in the first quarter, after the revision of the Gross Domestic Product statistics.
The dollar index, which measures the performance of the US currency against a basket of six currencies, was down 0.19% at 103.84. Last week it reached 104.7 points. Last week the index reached 104.7, its highest level since March 15.
The Bank of Canada surprised traders by raising interest rates to 4.75%, its highest level in 22 years. This hike came after the Reserve Bank of Australia raised rates on Tuesday.
“The view was that if both Australia and Canada felt the need for further hikes, in all likelihood the Federal Reserve would too,” Chris Turner, ING’s head of markets, said in a note to clients.
Based on derivatives market prices, traders believe there is a 70% chance the Fed will hold rates next week, and a 30% chance it will raise rates 25 basis points (bp).
The European Central Bank sets its rates on Thursday and traders expect a 25 basis point hike, followed by another 25 basis point hike in July to 3.75%.
Sterling was up 0.21% at $1.247. The dollar was down 0.29% against the Japanese yen at 139.71 yen to the dollar, after rising 0.37% the previous day. The yuan in local markets and the offshore yuan fell to their lowest level in six months against the dollar, further pressured by economic concerns.
Source: Ambito
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