Dollar rises ahead of Michigan sentiment and retail sales data

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The US dollar gains ground at the start of trading in Europe this Friday, but remains below its recent two-decade high, as expectations for a big interest rate hike in July fade.

By 09:00 AM ET, it was up 0.1% at 108.528, having hit 109.290 on Thursday, its highest level since September 2002.

Wednesday’s consumer price index reading, which showed inflation accelerating to its fastest pace in four decades, fueled expectations that the Federal Reserve will move to tighten monetary policy by at least 100 basis points in their meeting at the end of July, which has boosted the dollar.

However, these expectations have cooled down after Federal Reserve Governor Christopher Waller and St. Louis Fed President James Bullard, both known for their aggressiveness, said they favored another rate hike. 75 basis points this month, matching June’s hike.

The focus will be this Friday on the release of US retail sales data for June, which is expected to have risen 0.8% for the month as a whole, while the University’s consumer confidence index July’s Michigan data could offer a more pessimistic outlook.

The EUR/USD pair remains almost flat at 1.0016, above parity despite the fact that the highly respected Mario Draghi has tendered his resignation as Prime Minister of Italy after losing the support of one of the country’s main political parties. of his broad coalition government.

This political turmoil adds to an already negative macroeconomic outlook, as the European Commission showed on Thursday, which lowered its 2023 GDP forecast to 1.4% from 2.3%.

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The USD/JPY pair fell 1% to 138.79, after reaching the 139.38 level for the first time since September 1998, as the different monetary policies of the Fed and the Bank of Japan weighed on the Japanese currency.

The pair is approaching the highly psychologically important 140 level, last seen in 1998, which could trigger officials to intervene.

GBP/USD is down 0.1% to 1.1816 , after falling to a 28-month low of 1.1761, and is on track for its worst week since early May as political turmoil weighs on UK currency.

USD/CAD is up 0.1% to the 1.3127 level, with the greenback regaining its poise after the Bank of Canada bet on a 1 percentage point rate hike on Wednesday .

The Australian dollar is down 0.3% to 0.6726, the New Zealand dollar is steady at 0.6129, while the yuan is up 0.1% to 6.7636 after the economy China suffered a strong contraction in the second quarter, with a drop in GDP of 2.6% compared to the previous quarter.

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