Dollar weakens in Fed minutes; Euro awaits ECB news from Investing.com

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By Peter Nurse

Investing.com – The US dollar was slightly lower in early European trade on Thursday, continuing the sell-off of the previous session after minutes from the Federal Reserve’s last meeting signaled a slowdown in future rate hikes.

As of 03:05 ET (08:05 GMT), the , which tracks the greenback against a basket of six other currencies, was down 0.1% to 105.933 after falling 1% overnight.

The dollar sold off after the US Federal Reserve’s latest meeting revealed that a “substantial majority” of policymakers expected a slowdown in the pace of rate hikes would soon be appropriate.

The US dollar raised interest rates earlier this month by three-quarters of a percentage point for a fourth consecutive month to tame the rally, but minutes broadly confirmed expectations for a 50 basis-point hike in early December.

up 0.1% to 1.0407, benefiting from the dollar’s sell-off as traders await the release of the European Central Bank’s latest meeting later in the session.

rose to over 10% in October, but November indicated that the region was entering a recession, posing a dilemma for ECB policymakers.

The key interest rates will be raised significantly, but how far that will ultimately go depends on the development of the economic situation, said the head of the German Ifo economic institute on Tuesday.

“The ECB still has a long way to go,” said Clemens Fuest. “That’s simply because it started late.”

Also of interest will be where traders want to see the level of business confidence in the euro zone’s main economy.

up 0.2% to 1.2078, adding to the previous session’s 1.5% gain after preliminary data beat expectations although still pointing to economic contraction.

Sterling has rebounded sharply since falling to a record low of 1.0327 in September as the short-lived Truss government unveiled plans for large, unfunded tax cuts.

Elsewhere, it fell 0.6% to 138.79, with the yen trading near a three-month high and benefiting from the sharp fall in US Treasury yields following the release of Fed minutes.

The risk-sensitive rose 0.3% to 0.6748, while rising 0.1% to 0.6245, extending gains after Wednesday’s 75 basis point hike in interest rates, the largest rate hike on record.

fell 0.3% to 7.1485 after the Chinese government announced a rescue package for its struggling real estate sector amid COVID-19 cases continue to rise.

down 0.2% to 10.4379 ahead of Sweden’s central bank’s latest monetary policy meeting, which is expected to hike interest rates in an attempt to cut them more than expected.

“For a while it seemed like the fastest price increases were behind us. Unfortunately, these hopes were dashed given the inflation result for October. Prices rose quickly and across the board,” Nordea analysts said in a statement.

“The figures are likely to worry the Riksbank and reinforce the view that interest rates will rise by 75 basis points to 2.50%.”

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