Dollar Gains Slowly, Market Focus Shifts to Commodities & Stocks
The US dollar edged higher against European currencies on Tuesday, but the movement was relatively subdued as market attention was drawn more to commodities and the stock market. The euro weakened around 0.2% to $1.1699 after the latest data showed inflation in Germany and France tapering off faster than expected in December.
The lower inflation data pushed European government bond yields down several basis points, while US yields trended higher. This difference in yield movements makes the euro less attractive to investors. With inflation moving closer to target, the market also sees no need for the ECB to rush into policy changes, thus limiting the euro's room for strengthening.
The pound sterling also came under pressure as market participants speculated that UK inflation data could show a similar pattern. GBP fell slightly despite previously touching a multi-month high, indicating that the market is beginning to adopt a cautious stance while awaiting the release of further data.
Meanwhile, the impact of Venezuelan geopolitical news on currencies appears to be easing quickly. The dollar held steady against the yen around 156.46, with the dollar index holding around 98.10. The day before, the greenback was held back by weaker US manufacturing data and dovish comments from Fed officials, including warnings of the risk of rising unemployment.
However, expectations for the Fed's policy remain mixed. The market is indeed opening up the possibility of further easing, but for the end-of-January meeting, the highest probability still points to an interest rate hold. On the other hand, pro-risk currencies like the Australian dollar actually performed stronger, helped by optimism in global stocks.
As a safe haven, the Swiss franc appears less fortunate due to improving risk appetite. This allowed the US dollar to strengthen slightly against the CHF, although the overall movement remains far from major volatility.
Source: Newsmaker.id
