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The euro goes up before inflation data comes out, but the dollar stays steady

Image: Reuters Berita 24 English -  The euro got a boost on Tuesday as traders got ready for European inflation numbers to be high this week...


Image: Reuters

Berita 24 English -  The euro got a boost on Tuesday as traders got ready for European inflation numbers to be high this week and waited for a speech from the head of the central bank, Christine Lagarde. On the other hand, the U.S. dollar stayed strong because of worries about a recession.

Overnight, the euro went up 0.3% and briefly went above its 50-day moving average. It last sat at $1.0578.

Early in the Asia session, the dollar was worth 135.37 yen and $0.6936 per Australian dollar, which were small gains from the night before.

The inflation numbers for Germany are due on Wednesday, for France on Thursday, and for the euro zone on Friday. Lagarde, who is the head of the European Central Bank, will also talk at the ECB forum in Sintra, Portugal, on Tuesday at 8:00 GMT.

Kelvin Wong, an analyst at CMC, said, "This set of inflation data will have a big impact on the ECB's forward guidance on monetary policy, especially on the path of its interest rate hike cycle, which is expected to start in July."

The euro is trading strongly against the yen because people expect interest rates to go up. It last bought 143.28 yen, which is close to last week's seven-year high of 144.24. It's also getting stronger against the pound. This month, it's gone up 1.2% to 86.15 pence.

The euro is weakest against the Swiss franc, which has soared to test parity with the common currency after the Swiss National Bank raised rates unexpectedly in June.

Other markets didn't move much because traders are trying to decide whether to be happy that recent signs of weakness in the global economy can slow rate hikes or worried that it could be a sign of the start of a tough period of stagflation.

Bets on U.S. interest rate rises have lost some of their lustre because the Federal Reserve's benchmark funds rate is now expected to peak around 3.5 percent next year instead of 4 percent or higher. However, the dollar hasn't fallen far from its high points yet.

This month, the U.S. dollar index hit a 20-year high of 105.79 and was last stable at 103.93.

The Australian and New Zealand dollars, which are sensitive to risk, were left behind by last week's stock market rise. On Tuesday, the kiwi stayed the same at $0.6306.

At $1.2274, Sterling was also doing nothing.

Kit Juckes, a strategist at Societe Generale, said, "Stay long the dollar until some of the uncertainty has gone away."

"The dollar isn't likely to fall until the world economy is growing in a more stable way. Markets look ahead, but all we can see is danger right now."

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Bid prices for currencies at 1:30 GMT

Description: RIC Last U.S. Close Percentage Change YTD Percentage Bid High, Bid Low

Previous

Session

Euro/Dollar

$1.0579 $1.0583 +0.00 percent -6.91 percent +1.0586 +1.0571



Dollar/Yen

135.3050 135.4600 -0.12 percent +17.63 percent +135.5850 +135.3000



Euro/Yen

143.15 143.35 -0.14 percent +9.84 percent +143.4500 +143.1300



Dollar/Swiss

0.9558 0.9562 -0.07 percent +4.75 percent +0.9567 +0.9555



Sterling/Dollar

1.2274 1.2265 +0.07 percent -9.24 percent +1.2283 +1.2263



Dollar/Canadian

1.2866 1.2872 -0.05 percent +1.76 percent +1.2878 +1.2858



Aussie/Dollar

0.6929 0.6925 +0.09 percent -4.65 percent +0.6938 +0.6918



NZ

Dollar/Dollar 0.6300 0.6302 -0.02 percent -7.96 percent +0.6307 +0.6293




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