Investing.com – The US dollar fell in early European trade on Thursday, continuing a sustained sell-off from the previous session after minutes from the Federal Reserve’s latest meeting suggested it could slow the pace of rate hikes in the future.
The American is now falling by 0.45%, to record 105,730 against a basket of foreign currencies, while the 10-year returns fell by 0.54%, to record 3.725% now.
It is now rising marginally, as it trades at 1.0404 per dollar, and the euro is waiting for the ECB’s decision to move more aggressively.
The dollar sold off after it was revealed that the “vast majority” of policy makers expected there would be a slowdown in the pace of interest rate hikes soon.
The Fed raised its key interest rate by three-quarters of a percentage point earlier this month, for the fourth time in a row, in an effort to tame high inflation, but the minutes greatly boosted expectations of a 50 basis point rate hike in early December.
EUR/USD rose 0.1% to 1.0407, benefiting from dollar selling as traders await the ECB’s last meeting calculation release later in the session.
Inflation in the Eurozone rose above 10% in October, but PMIs for November indicated the region had entered recession, creating a dilemma for ECB policymakers.
The head of the German economic institute Ifo said on Tuesday that the European Central Bank will raise interest rates significantly, although how far they ultimately go will depend on how the economic situation evolves.
“The ECB still has a long way to go,” said Clemens Fest, “simply because it started moving late.”
Also of interest will be the German Ifo Business Climate, as traders look to see the degree of business confidence in the Eurozone’s most important economy.
GBP/USD rose 0.2% to 1.2078, adding further growth to the previous session’s gain of 1.5% after preliminary data for UK economic activity beat expectations, although it still indicated an economic contraction.
It has recovered strongly since falling to a record low of 1.0327 in September when the short-lived Truss government unveiled plans for large unfunded tax cuts.
Elsewhere, the JPY/USD pair fell 0.6% to 138.79, with the yen trading near a three-month high benefiting from a sharp drop in US Treasury yields after the release of the Fed’s meeting minutes.
The risk-sensitive AUD/USD rose 0.3% to 0.6748, while NZD/USD rose 0.1% to 0.6245, extending gains after the Reserve Bank of New Zealand raised interest rates by 75 basis points on Wednesday, its biggest rally ever. Absolutely.
CHN/USD fell 0.3% to 7.1485 after the Chinese government announced a rescue package for the ailing real estate sector as coronavirus cases continue to rise.
USD/SEK fell 0.2% to 10.4379 ahead of the latest policy decision meeting by the Riksbank, where the Riksbank is expected to raise interest rates in a bid to curb higher-than-expected inflation.
Analysts at Nordea said in a note: “For a while it looked as if we had passed the fastest rate hikes. Unfortunately, those hopes were dashed given the October inflation result. Prices rose quickly and across the board.”
“The numbers are likely to worry the Riksbank and reinforce the view that the interest rate will be raised by 75 basis points to 2.50%.”