Rate Exchange 05/06: Dollar strengthens, euro falls on prospect of ECB rate hike

Rate Exchange 05/06: Dollar strengthens, euro falls on prospect of ECB rate hike


The dollar was up on Tuesday morning in Asia. The euro has given up on some recent gains but is heading for its best month of the year, with markets repositioning in anticipation of rate hikes in Europe and a possible pace of US rate hikes. potentially slower.

The Dollar Index that tracks the greenback against a basket of other currencies was up 0.31% to 101.39 by 1:32 a.m. ET (5:32 a.m. GMT).

USD/JPY was up 0.30% to 127.94. The yen has fallen on the day but is heading for its strongest month since July 2021.

AUD/USD inched down 0.04% to 0.7193 and NZD/USD fell 0.14% to 0.6545.

USD/CNY rate inched 0.05% to 6.6580. China data released earlier in the day showed that the manufacturing purchasing managers index (PMI) for May 2022 was 49.6 and the non-manufacturing PMI was 47.8.

GBP/USD fell 0.24% to 1.2620, with a monthly gain of 0.5% against the dollar, the first monthly gain in 2022.

The euro was at $1.0745, down 0.3% after touching a five-week high of $1.0786 overnight.

German inflation rose to its highest level in nearly half a century in May, according to data on Monday, further reinforcing the possibility of a more aggressive rate hike by the European Central Bank. The central bank is expected to start raising interest rates for the first time in July 2022 since the COVID-19 pandemic began in 2020.

With the Eurozone consumer price index (CPI) later in the day, followed by German data, it is likely to also be higher than expected, according to CBA analysts.

In addition, "there are several ECB officials speaking tonight, there will be no doubt when they talk about the prospect of higher European interest rates".

The euro is also on track for a 2.2% gain in May 2022, its biggest monthly gain in a year, and the dollar index fell to a 5-week low of 101.29 overnight.

“The focus has shifted from higher inflation and more rate hikes to worries about whether Fed tightening will put pressure on the economy,” said Saxo Markets Hong Kong market strategist Redmond Wong. economic or not and that has weakened the dollar over the past few weeks.”

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