Dollar Gains As National Banks Brief Hazard Avoidance

In early European trade on Friday, risk aversion led to a rise in the value of the US dollar as a result of more aggressive monetary tightening by a number of central banks, including the Bank of England.

The Dollar Index, which compares the dollar to a basket of six other currencies, was 0.3% higher at 102.280 at 02:00 ET (6:00 GMT), just above its one-month low.

Real battles after robust BOE climb
GBP/USD fell 0.3% to 1.2706, battling having hopped momentarily following Thursday’s rate increment of 50 premise directs by the Bank of Britain toward a close to one-year high.

“Sterling initially jumped on the larger-than-expected rate hike, but then reversed course, presumably on the belief that the BoE is prepared to engineer a harder slowdown to control inflation. In a note, analysts at ING stated, “One could argue that as a currency that is sensitive to growth, this is all bad news for the pound.”

The risk that higher interest rates will lead to a recession in the United Kingdom has impacted the pound and prompted some investors to look for safe-haven assets like the United States dollar, despite the fact that higher interest rates typically support currencies.

Retail sales data from the United Kingdom that were released earlier on Friday showed an annual decline of 2.1% in sales in May, providing evidence of the economic slowdown.

As he finished his two-day testimony before Congress, Federal Reserve Chair Jerome Powell reiterated his belief that U.S. interest rates could rise at least twice more this year to contain high inflation.

Powell stated during a Thursday hearing before the Senate Banking Committee, “We don’t want to do more than we have to.” Most members of the Federal Open Market Committee do agree that more rate hikes are on the way, but we want to do so at a pace that lets us see new data.”

Additionally, on Thursday, the Swiss National Bank and the Norwegian central bank both signaled that further tightening was likely to occur by raising interest rates by 25 bps and 50 bps, respectively.

EUR/USD falls ahead of PMIs EUR/USD fell 0.3% to 1.0930 ahead of the survey of purchasing managers in the region.

A conditioning in movement is to a great extent expected, however strong numbers may likewise stir things up around town as they would recommend higher rates ahead in a locale which fell into downturn in the primary quarter of the year.

Despite core CPI in Japan rising to a 42-year high during the month of May, indicating that underlying Japanese inflation remained heated, the risk-sensitive AUD/USD fell 0.9% to 0.6694 and the USD/JPY rose 0.2% to 143.37.