By Saikat Chatterjee
LONDON, May 5 (Reuters) – The euro pulled again from a one-week excessive in opposition to the U.S. greenback on Thursday after German industrial orders fell greater than anticipated in March, signalling Europe was going through rising headwinds from the battle in Ukraine.
The greenback had weakened after the Fed raised rates of interest by 50 foundation factors. Hedge funds trimmed prolonged lengthy positions after Fed Chair Jerome Powell instructed reporters later that policymakers weren’t actively contemplating 75-basis-point strikes sooner or later.
But the U.S. foreign money noticed some contemporary demand in London buying and selling after Germany reported industrial orders in March suffered their greatest month-to-month drop since final October.
While strain grows on world policymakers to rein in surging inflation, the German information raises questions how shortly can the European Central Bank afford to tighten coverage with out choking financial progress. Money markets count on an ECB rate of interest hike as early as July.
“The German information was dreadful and the greenback is regaining some misplaced floor,” stated a dealer at a European financial institution.
The greenback index slid 0.9% from close to a two-decade excessive to 102.450 within the wake of the Fed determination, however was up 0.4% in early London buying and selling at 102.82.
The single foreign money which briefly climbed to a one-week excessive of $1.0639 on Thursday ceded positive aspects and fell 0.2% to $1.06020 It matched an early 2017 low of $1.0470 final month.
Expectations of a hawkish Fed have weighed closely on markets this yr and powered the greenback larger. It is up greater than 7% to date this yr in opposition to a basket of different main currencies, on monitor for its greatest annual positive aspects since 2015.
But with its index now round 103, traders are questioning whether or not the greenback has legs to rise greater than 15% to its 2002 highs or fall again by an analogous margin to the lows of 2017 and 2020.
“The solely factor that may change the outlook of a broadly stronger greenback is a weakening of the U.S. economic system,” stated Kenneth Broux, a foreign money strategist at Societe Generale in London.
Sterling fell greater than 0.5% to $1.2561 earlier than a Bank of England (BoE) assembly the place merchants have totally priced a 25 basis-point price hike.
(Reporting by Saikat Chatterjee; Editing by Hugh Lawson and Tomasz Janowski)