Hong Kong, May 31 (BUS): The euro gave up some of its recent gains on Tuesday, but still braced for its best month in a year as markets repositioned in anticipation of an interest rate hike in Europe and a possible slowdown. High prices in the United States.
The euro hit $1.0747, down 0.3%, after hitting a five-week high of $1.0786 overnight, as data showed German inflation rose to its highest level in nearly half a century in May on the back of higher energy and food prices. , according to Reuters reports. .
This reinforces the argument for sharper rate increases from the European Central Bank, which is expected to start raising interest rates in July for the first time since the pandemic began.
Eurozone CPI data is due later on Tuesday, and CBA analysts said German data suggests this may come in higher than expected as well.
In addition, he said in a note to clients, “A number of ECB officials are speaking tonight, and they are undoubtedly talking about the prospects for higher European interest rates.”
The euro is set to rise 2.2% in May, which will be its biggest monthly rise in a year.
The dollar index was at 101.65, after dropping to a five-week low of 101.29 overnight. The index measures the US currency against six peers with the largest weight in the euro.
“Focus has shifted from higher inflation and further rate hikes to concerns about whether the Fed’s tightening has put pressure on the economy, and that has caused the dollar to weaken over the past few weeks,” said Redmond Wong, market analyst at Saxo Markets Hong. Kong.
However, noting that there is no certainty that the Fed will walk away from the aggressive tightening pace, he referred to the hawkish comments from Fed Governor Christopher Waller, adding, “So this trend of dollar weakness could be reversed.”
Investors say the recovery in sentiment towards riskier assets and currencies caused in part by the easing of the lockdown in China’s financial hub in Shanghai has also weighed on the safe-haven greenback recently.
News that European Union leaders agreed in principle on Monday to cut most oil imports from Russia by the end of this year sent oil prices higher and boosted commodity currencies.
The Canadian dollar touched 1.2653 against the dollar, close to a one-month high overnight, ahead of the Bank of Canada meeting on Wednesday where all 30 economists polled by Reuters expected a 50 basis point rate hike to 1.50%.
The Australian dollar was at $0.7191, up sharply last week, but little changed on the day despite better-than-expected PMI data from China.
Bitcoin was on top at around $31,600 after rising above $32,000 overnight for the first time in more than three weeks.
The British pound was at $1,261 and is set to post a 0.5% monthly gain against the dollar, its first monthly rise in 2022.
The yen was at 127.95 per dollar, the weakest on the day, but braced for its strongest month since July of last year.