Investing.com – The US dollar lost positions in early trading Thursday in Europe in anticipation of the release of key US growth data, amid concerns about bank contagion risks, a slowing economy, and a stagnant debt ceiling.
As of 09:15 AM ET (0915 GMT), the currency index, which tracks the currency against a basket of six other major currencies, was down 0.1% at 101.162, based on a 0.4% drop overnight, when it hit Almost two lows for the week at 101.00.
The dollar continued to fall this Thursday, and the mood around the currency was not helped by the fact that depositors’ confidence in First Republic Bank continued to sag after revelations about $100 billion in customer withdrawals last month.
Its shares plunged 30% on Wednesday, adding to similar losses the day before, and raising questions about its long-term viability, as well as the scope for future borrowing from similar US regional lenders if they decide to hoard cash.
Concerns that reduced lending will dampen economic activity add to signs that US economic growth is already slowing as the Federal Reserve tightens its control to combat escalation.
The figure for the first quarter from the US will be released during the day and is expected to show growth eased to 2.0% in the first three months of the year, compared to 2.6% in the previous quarter. ..
It is likely to raise interest rates by another 25 basis points next week, although expectations are growing that this will really peak, and that rates will start to fall in the second half of the year.
“The dollar hasn’t really reflected the Fed’s prudent increase in rate expectations, as rate cut expectations have risen steadily since the end of last week,” ING (AS:) analysts said in a note.
US politicians are also still struggling to agree on whether to raise the country’s debt ceiling, currently at $31.4 trillion, which has caused spreads on US sovereign default swaps to rise as investors hedge against a default.
The euro was one of the main beneficiaries of this dollar weakness, as the pair rose 0.1% to 1.1046, close to its overnight highs again at 1.1096, the highest level since April last year.
German consumer confidence rose on Wednesday, rising for the seventh time in a row, amid signs that the euro zone’s largest economy will not enter recession this year.
It is also expected that the central bank will raise interest rates next week, but with signs of recovery emerging in the European economy, and the banking sector in the region being considered more flexible, it is likely that the central bank will continue to raise interest rates until the summer, and support the single currency.
The pair fell by 0.1% to 1.2463, and rose by 0.4% to 0.6623, while the pair rose to 133.71 before Friday’s meeting.
New Bank of Japan Governor Kazuo Ueda has indicated that the bank will generally maintain its ultra-cautious stance in the short term, although higher inflation and wage growth may spur some tightening heading into the end of the year.
The pair rose 0.2% to 19.4304 ahead of the Central Bank of Turkey meeting where policymakers are expected to maintain benchmark interest rates at 8.5% for the second month in a row.