Euro’s post Fed glow fades on bleak German industrial orders
By Saikat Chatterjee
LONDON (Reuters) – The euro pulled again from a one-week excessive towards the U.S. greenback on Thursday after German industrial orders fell greater than anticipated in March, signalling Europe was going through rising headwinds from the battle in Ukraine.
The greenback had weakened after the Fed raised rates of interest by 50 foundation factors. Hedge funds trimmed prolonged lengthy positions after Fed Chair Jerome Powell instructed reporters later that policymakers weren’t actively contemplating 75-basis-point strikes sooner or later.
However the U.S. foreign money noticed some recent demand in London buying and selling after Germany reported industrial orders in March suffered their greatest month-to-month drop since final October.
Whereas strain grows on world policymakers to rein in surging inflation, the German information raises questions how shortly can the European Central Financial institution afford to tighten coverage with out choking financial progress. Cash markets count on an ECB rate of interest hike as early as July.
“The German information was dreadful and the greenback is regaining some misplaced floor,” stated a dealer at a European financial institution.
The greenback index slid 0.9% from close to a two-decade excessive to 102.450 within the wake of the Fed determination, however was up 0.4% in early London buying and selling at 102.82.
The one foreign money which briefly climbed to a one-week excessive of $1.0639 on Thursday ceded beneficial properties and fell 0.2% to $1.06020 It matched an early 2017 low of $1.0470 final month.
Expectations of a hawkish Fed have weighed closely on markets this yr and powered the greenback larger. It’s up greater than 7% to date this yr towards a basket of different main currencies, on monitor for its greatest annual beneficial properties since 2015.
However with its index now round 103, buyers are questioning whether or not the greenback has legs to rise greater than 15% to its 2002 highs or fall again by an analogous margin to the lows of 2017 and 2020.
“The one factor that may change the outlook of a broadly stronger greenback is a weakening of the U.S. financial system,” stated Kenneth Broux, a foreign money strategist at Societe Generale in London.
Sterling fell greater than 0.5% to $1.2561 earlier than a Financial institution of England (BoE) assembly the place merchants have absolutely priced a 25 basis-point charge hike.
(Graphic: US greenback and treasury, https://fingfx.thomsonreuters.com/gfx/mkt/lbpgnymkgvq/USpercent20dollarpercent20andpercent20treasury.JPG)
(Reporting by Saikat Chatterjee; Enhancing by Hugh Lawson and Tomasz Janowski)
