Euro/dollar treads water as traders wait for more clues on rates

FAN Editor
FILE PHOTO: Rolled Euro banknotes are placed on U.S. Dollar banknotes
FILE PHOTO: Rolled Euro banknotes are placed on U.S. Dollar banknotes in this illustration taken May 26, 2020. REUTERS/Dado Ruvic

November 9, 2021

LONDON (Reuters) – The euro held steady against the dollar on Tuesday and most currency pairs were stuck as traders waited for U.S. inflation data later in the week and more speeches from central bank governors for some clues on the direction of interest rates.

After central banks sought to push back against rising rate hike expectations last week, sending the euro and the pound tumbling, currency markets have settled back into another spell of low volatility.

The euro stood at $1.1587, unchanged on the day, and the dollar index at 94.001, also little moved.

Adam Cole, currency analyst at RBC Capital Markets, remains constructive on the dollar. That is based on a “purely vanilla nominal rates story” predicated on his prediction that the divergence in rate expectations with the U.S. would soon shrink, supporting the dollar.

“We will get better direction when we get to the U.S. CPI,” he said, referring to data due out on Wednesday.

The data is expected to show U.S. consumer prices galloped and Chinese factory gate prices soared in October.

Ahead of the inflation data, a slew of central bankers are due to speak later on Tuesday, including European Central Bank President Christine Lagarde at 1300 GMT and Fed chair Jerome Powell at 1400 GMT.

Elsewhere the yen rose again to a one-month high versus the dollar after hitting a four-year low last month. The yen was last at 112.97 per dollar, leaving the greenback down 0.2% on the day.

Sterling, hammered last week in the wake of the Bank of England surprise to keep rates on hold, was last at $1.3558, flat on the day but still some way off a low of $1.3425 hit on Friday.

The Norwegian crown steadied at $0.7163 after jumping on Monday, drawing support from traders wary of the possibility that the Reserve Bank of New Zealand could raise rates by as much as 50 basis points (bps) later this month.

“If the RBNZ is of a mind to hike by 50bps, now’s the time,” ANZ analysts said in a note.

“That still seems incongruous with the uncertain global backdrop and cautious tone of other central banks. Still, until we know the outcome, markets will price in the risk.”

The risk-sensitive Australian dollar held onto most of its gains made overnight to trade at $0.7422 on Tuesday.

Bitcoin rose to a record $68,564 in Asia trade, pulling ether with it to a record $4,800. The bitcoin price was last at $68,038.

(Reporting by Tommy Wilkes,; Additional reporting by Tom Westbrook in Sydney; Editing by Emelia Sithole-Matarise)

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