Dollar Surges as European Inflation Slows
31 May 2023
As European inflation slows, the dollar rises to its highest level since mid-March.
After statistics revealed that China’s growth is faltering and that European inflation is declining faster than anticipated, the U.S. dollar surged on Wednesday to a more than two-month high.
Early in the session, the euro dropped to $1.066, its lowest level since March 20. At $1.068, it was recently down 0.54%.
As a result, the dollar index, which compares the value of the dollar to those of six major rivals, increased to 104.63, its highest level since March 16. At 104.5, it was recently up 0.43%.
According to data released on Wednesday, inflation is rapidly slowing down in France and some of Germany’s largest states.
According to analysts, the numbers lessened the pressure on the European Central Bank (ECB) to continue rising interest rates, which decreased the attractiveness of the euro in comparison to the dollar.
As increases in the price of food and energy slowed, France’s inflation fell to its lowest point in a year in May. Data on inflation across the Eurozone is expected tomorrow.
Carl Hammer, chief strategist of European bank SEB, said that “European inflation is rolling back now and you’re taking back some of the previously anticipated hikes from the ECB.”
According to economists, China’s weak economic data helped to strengthen the US dollar. According to a poll released on Wednesday, China’s factory activity decreased more quickly than anticipated in May, the latest indication that the nation’s recovery from COVID-19 lockdowns is stalling.
After Japan’s top currency ambassador said policymakers “will closely watch currency market moves and respond appropriately as needed,” the dollar spiked to a six-month high of 140.93 on Tuesday but subsequently plunged.
On Wednesday, it initially continued to decline but then recovered and was last up 0.15% at 139.98 yen.
Here are some of the factors that are affecting the Dollar Index as of now:
- The Federal Reserve’s monetary policy
- The strength of the U.S. economy
- The global economic outlook