The dollar continued to fall against the euro for the third consecutive session following the news that European Central Bank policymakers are considering raising interest rates by 50 basis points – much higher than expected – meeting on Thursday (July 21) to prevent record-high inflation.
The euro’s rally pushes the common currency away from the dollar parity reached last week, as market participants reduce expectations for a rate hike by the US Federal Reserve. 100 basis points in this month’s session – the factor that pulled the greenback lower after the recent strong rally.
“Currency rates continue to hinge on expectations for central bank policy,” said Joe Manimbo, senior market analyst at Western Union Business Solutions, based in Washington. “We’re seeing a subtle but significant change in the outlook for transatlantic monetary policy, and that’s proving to be in favor of the euro,” Manimbo said.
The euro rose to 1.0269 EUR/USD as of the end of July 19 Vietnam time, up 1.2% from the previous session and the strongest gain since July 6 – when the market The money market values a 60% chance that the Fed will raise the basic interest rate by 50 percentage points, instead of the previous 25 points forecast.
The Dollar index (DXY) – which compares the USD with a basket of key partner currencies – ended July 19 in Vietnam time down 0.8% to 106.53, a drop almost equivalent to 2 consecutive sessions. before. Despite the decline, DXY is still close to a two-decade high of 109.29 hit last week.
However, analysts remain skeptical that the euro can sustainably appreciate given continued concerns about natural gas supplies and its impact on the region’s economy, and are yet to It is clear how “hawkish” the European Central Bank (ECB) will actually be in its monetary policy.
“In our view, this rally is likely to be short-lived and profitable for short-term euro positions,” said Dominic Bunning, head of research. HSBC’s European foreign exchange said.
Investors are also eyeing the political drama in Rome with the Italian government in a state of uncertainty over whether Mario Draghi will continue as Prime Minister.
“Italy without Mr Draghi would be in a state of instability and would tend to add to the recent weakness in the euro,” Mr Manimbo said.
Traders are also waiting until Thursday (July 21) to see if Russian gas will continue to flow through the Nord Stream pipeline to Germany after shutting down for scheduled maintenance. Russian gas flows through the Nord Stream 1 pipeline are expected to restart on time on Thursday after completing scheduled maintenance, two sources told Reuters.
Elsewhere, the Australian dollar rose 1.3% to $0.6903/AUD, after Reserve Bank of Australia policymakers said they see a need for further policy tightening after recent interest rate hikes.
The British pound GBP rose 0.6% to $1.2022, joining the trend of other currencies recovering against the USD.
China’s yuan was almost unchanged against the USD as currency traders consider the economic impact of new anti-Covid-19 blockades and the Government’s efforts to Real estate support is in trouble.
Ending July 19, the yuan was at 6.7472 CNY/USD, only slightly down from the previous session.
China has reported 776 new cases of the Covid-19 virus, raising concerns about new restrictive measures to contain the outbreak. But that concern is offset by investor optimism that the Chinese government has taken initiatives to stabilize the property sector.
In the cryptocurrency market, Bitcoin surged, at the end of July 19, Vietnam time surpassed $ 23,000, the highest in more than a month. Some argue that crypto market sentiment is improving amid signs that the global economy will remain solid for the foreseeable future, and that the Fed will raise interest rates by 75 points instead of the Fed. 100 score.
Gold prices steadied in the past session as a weaker dollar made gold cheaper for buyers in other currencies, as gold investors waited for more signals from central banks. world leader in their monetary policy planning.
Spot gold price at the end of July 19 in Vietnam time was stable at 1,709.59 USD/ounce, after reaching 1,718.19 USD at one point; August gold futures fell 0.2% to $1,707.20.
However, UBS analyst Giovanni Staunovo said gold price volatility is likely to intensify as more US manufacturing data comes out later this week, which could affect the size of the next rate hike.
References: Refinitiv, Coindesk