US Dollar Moves Higher Ahead of Key Inflation Data
- US dollar climbs against major currencies ahead of inflation data, Fed Chair speech
- EUR/USD, GBP/USD trade lower this week
US Dollar Moves Higher
The US dollar ticked to the upside across the board on Monday and the early hours of Tuesday’s session. Concerns over a return of Covid-19 infections in Europe caused investors to flock to the greenback in search of a safe haven while they awaited fresh insights about the pace of the US economic expansion.
A few key events are likely to define this week’s moves in the US dollar. Inflation data today will be closely watched by market participants as it will reveal whether the climb in prices is taking a more solid footprint on the US economy or it is actually fading as the Federal Reserve has predicted.
On Wednesday and Thursday, Fed Chair Jay Powell will be giving his testimony on the state of the economy before Congress. During his speech as part of the semiannual report, Mr. Powell is expected to highlight Fed’s outlook for employment and inflation, along with the central bank’s plans to pare back asset purchases and easy-money policies.
EUR/USD, GBP/USD Trade Lower This Week
In light of the forthcoming events, the US dollar has extended its dominance over other major currencies, including the euro and the sterling.
The EUR/USD has declined this week to a session low of 1.1836 on Monday. The exchange rate turned negative yesterday, snapping a two-day winning stretch as it ended Monday trading at 1.1860, lower by 0.20% on the day. Today, the pair is still mildly pressured, lower by 15 pips from the opening price of 1.1860.
Apart from broad US dollar strength, recent comments by ECB officials that inflation could remain higher for longer weighed on the euro. Yesterday, ECB’s Vice President Luis De Guindos said that higher prices could be more persistent than initially projected. On the topic, the ECB is scheduled to meet on July 22 and discuss potential new guidance.
The GBP/USD is also led by gains for the dollar this week. On Monday, the pair reached a session low of 1.3839, down over 0.50% on the day. Later, however, the rate recovered a bit and ended the day at 1.3885, lower by 0.18%. The sterling was also negatively affected by the prospects of lifting almost all Covid-19 restrictions from next week despite a surge of cases. Today, the GBP/USD is trading lower by about 30 pips, currently floating around 1.3855.
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