On Thursday, the US dollar fell against the euro, as investors were considering the outlook of the policy of the US Federal Reserve against the possibility that a recession could occur due to higher interest rates.
Next week, the Bank of England (BoE), European Central Bank (ECB), and the Fed are all scheduled to have their policy meetings and will announce their respective increases in interest rates.
Policymakers have been continuously trying to put a stop to economic growth in order to tame the inflation that remains stubbornly high.
Investors and traders will be on the lookout for any indications that the Fed might be gearing up to hit a pause on its rate hikes.
The tightening cycle
Market analysts said that the US dollar had shown some weakness recently because of the possibility that the tightening cycle might be coming to an end.
They also said that the movement of the dollar would also depend on when they decide to hit pause and for how long they do it.
According to analysts, markets are preparing to see some weakening in the US dollar, but they cannot be certain for now because there are numerous global risks involved.
There was a 0.37% drop in the dollar against the euro, as the latter reached $1.05435. But, it rose 0.13% against the British pound, which was trading at $1.2228.
The Japanese yen, on the other hand, recorded gains of 0.7% against the US dollar to reach 136.405.
Next week, the numbers for the monthly consumer inflation are due in the United States, exactly a day before the US Fed is scheduled to meet on December 14th.
These numbers could prove to be key in establishing the long-term expectations regarding the monetary policy of the US central bank.
Currency strategists said that the consumer price index (CPI) was one piece of data that would also help determine the direction of the US dollar.
They said that not much would happen before then and until they reach the next week’s meeting of the US Fed.
On the other hand, oil prices dropped below $80 per barrel for the first time since late February when Russia invaded Ukraine.
This was due to rising concerns about the impact on global energy demand due to a slowing economy. There was also a fall in Brent crude futures, as they went below $78.
This is almost half of $139.13, which was the price back in March, when they hit a high of 14 years.
The American Automobile Association said that gasoline prices in the US had reached a record high of $5.06 in June, but have dropped 0.4% to $3.329, where they had been a year before.
Since energy prices have dropped, the inflation expectations have also relaxed because they had been primarily driving up the prices.
This and the possibility that the Fed might decide to slow its pace of interest rate hikes have hit the dollar hard this quarter and it has lost 6.2%.
This would make it the worst quarterly performance for the US dollar since 2010’s third quarter when it had lost 8.5%.
However, it would make it the greenback’s worst performance in a fourth quarter since 2004. The price movement shows that inflation concerns have reduced and growth concerns have risen.