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Dollar strengthens somewhat as impact of Fed minutes fades

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News Tech: The US dollar edged higher on Thursday after a sharp drop in the previous session, which pared losses in minutes from the Federal Reserve’s December policy meeting, raising expectations for interest rates. as well as labor market and trade balance data. Minutes show central bank policymakers are concerned about rising inflation, plus a tightening labor market, which could lead to an earlier-than-expected Fed rate hike and start reducing holdings. Traders are currently pricing in about a 70% chance of a rate hike by at least 25 basis points at the Fed’s March meeting, according to the CME FedWatch Tool.

Other data showed the U.S. trade deficit widened sharply in November to $80.2 billion, suggesting a potential hit to fourth-quarter economic growth. The dollar index rose 0.096 percent. Analysts view 96.40 for the Dollar Index as a technical resistance point, with a break above likely leading to a test of the December high of 96.91. Steven Ricchiuto, the chief US economist at Mizuho Securities USA LLC in New York, forecasts that the dollar’s rise in the dollar index will continue into early 2022 towards the 98 levels, with a “surpassing” level. level” could be 100.

“The market is paying more attention to monetary policy and this contagion and that’s really what’s driving the dollar higher,” said John Kicklighter, an analyst at DailyFX.com in Chicago. “If you’ve priced in possibly the most aggressive and hawkish view you’ll ever have, how far will the dollar go?” Labor market data showed initial weekly jobless claims rose 7,000 to a seasonally adjusted 207,000. Slightly higher than expected 197,000. The data comes after a very strong private payrolls report Wednesday in the ADP National Employment Report and ahead of the December payrolls report on Friday.

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A report from the Institute for Supply Management showed that activity in the US services sector slowed more than expected in December, possibly due to an increase in COVID-19 infections. However, investors see the new Omicron variant as unlikely to severely damage economic activity. According to preliminary data on Thursday, the euro fell 0.19% to $1.1292 as annual inflation in Germany slowed in December for the first time in six months, but still above the Bank’s 2% target. European Central Bank, according to preliminary data on Thursday.

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