By Peter Nurse
Investing.com – The U.S. dollar edged higher in early European trading on Thursday but remained near a one-month low amid concerns that aggressive Federal Reserve tightening could already slow economic growth .
As of 03:05 ET (0705 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading slightly higher at 102.095, still below the two-decade high above 105 observed in mid-May.
Minutes from the Fed’s early May meeting, released on Wednesday, said central bank policymakers would stick to a plan to hike rates by half a percentage point in its next two months. meetings starting next month, largely as planned.
However, they have also largely ruled out even more aggressive tightening while creating the possibility of a pause in rate hikes, following the June and July hikes, which Atlanta Federal Reserve Chairman Raphael Bostic, suggested earlier in the week.
The reduction in Fed tightening bets followed slowing economic growth, with new home sales falling nearly 17% last month and retailers reporting disappointing results as consumers cut discretionary spending as prices of essentials like food and gasoline are skyrocketing.
Later in the session, attention will turn to the release of the US Q1 GDP figure, which is expected to show a 1.3% decline, and initial weekly jobless claims data.
“We believe the downside potential for the dollar is diminishing, particularly given more balanced positioning after widespread squaring of positions and a still supportive Fed history,” ING analysts said in a note.
EUR/USD fell 0.2% to 1.0664 as the single currency restored some of its earlier gains after European Central Bank President Christine Lagarde announced an end to negative interest rates in the euro area in the third quarter.
GBP/USD fell 0.1% to 1.2558, USD/JPY fell 0.1% to 127.22, while risk-sensitive AUD/USD fell 0.3% at 0.7070. NZD/USD fell 0.3% to 0.6458, shedding most of the gains after Wednesday’s Reserve Bank of New Zealand meeting.
Elsewhere, USD/TRY rose 0.1% to 16.3788 as economists expect Turkey’s central bank to keep its benchmark interest rate unchanged at 14% at its policy-setting meeting. politics later Thursday, even as inflation soared.
Russia’s central bank is also expected to hold an extraordinary rate-setting meeting later on Thursday, the day after the country’s consumer price index fell 0.02% after rising 0.05% in the week. previous, according to data from the Rosstat statistics service.
In annual terms, inflation slowed to 17.51% from 17.69% a week earlier, which could help the central bank take the decision to lower its key rate by 14%.
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