Euro crumbles; traders wait on U.S. consumer test

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SYDNEY (Businesshala) – The euro was at a 16-month low on Tuesday, while the dollar held firm as traders await US retail sales data, a strong reading that could contain inflation and calls on the Federal Reserve to hike rates. Could put pressure.

FILE PHOTO: The European Central Bank (ECB) presents a new 50 euro note at the bank’s headquarters in Frankfurt, Germany on July 5, 2016. Businesshala/Ralph Orlowski/File photo

Talks between US President Joe Biden and his Chinese counterpart Xi Jinping during the Asia session are also likely to set the tone in financial markets, and the currency move was little ahead of any outcome of the discussions.

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The yuan was steady at 6.3812 per dollar offshore.

The euro fell below $1.14 for the first time since July last year amid concerns about the COVID-19 outbreak and as Europe’s central bank chief pushed back against the need to act to tame inflation .

The common currency held steady at $1.1361 after plunging $1.1356 on Monday and the fall helped push the US dollar index to a 16-month high of 95.595. The dollar also strengthened against the yen overnight and was largely stable elsewhere.

It last bought 114.14 yen while the euro was near a one-month low of 129.64 yen touched on Monday.

“If we take any tough measures now, it could cause far, far more damage,” European Central Bank President Christine Lagarde told EU lawmakers.

“We expect the ECB to be cautious on policy in the coming months to limit recovery prospects for the euro against the dollar,” said Jane Foley, senior FX strategist at Rabobank.

“Our current forecast of $1.14 for the EUR/USD for mid-2022 looks out of date … we will revise our forecast later in the week.”

Voices across the Channel The Gulf sent the euro on its sharpest slide against the pound in six months as Bank of England Governor Andrew Bailey told a parliamentary committee he was “very uneasy” about inflation.

Canada’s central bank chief Tiff McCalem was even more outspoken and said that “we are getting closer” to an increase in a Financial Times opinion, taking the Canadian dollar to a four-and-a-half-year high against the euro.

Australia is focusing on Reserve Bank of Australia (RBA) Governor Philip Lowe’s speech on inflation ahead of US retail sales figures due by 1330 GMT.

Hawkishness will come as a surprise after minutes of this month’s meeting showed the bank still expects it to keep rates at record levels through 2024, even if it acknowledged upside risk on inflation.

“Risk today is tilted towards AUD/USD weakness given the large gap between market pricing and RBA rhetoric for rate hikes in 2022,” said Commonwealth Bank of Australia analyst Joe Caperso.

The Australian was last hovering at $0.7346, just below its 50-day moving average of $0.7362. The kiwi awaits the Reserve Bank of New Zealand meeting next week and was stable at $0.7040. [AUD/]

Sterling stood at $1.3411. [GBP/]

US consumption data follows a survey of surprisingly weak consumer sentiment and unexpectedly strong Empire State trading conditions last week, which pushed up Treasury yields overnight.

Sales are expected to pick up.

“In our view, the forecasts point to good data, which could increase bets on a hike by the Fed following the uptick in the US CPI last week,” said Charlambos Pisoros, head of research at JFD Group. In a note to customers in Cyprus.

Reporting by Tom Westbrook; Editing by Sri Navaratnam

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