Sage Investment Club


© Reuters.

By Peter Nurse

Investing.com – The U.S. dollar edged higher Thursday, gaining some support from the generally hawkish tone of the minutes of the Federal Reserve’s December meeting.

At 03:15 ET (08:15 GMT), the , which tracks the greenback against a basket of six other currencies, rose 0.1% to 104.095.

The of the Fed’s latest policy meeting, released late Wednesday, indicated agreement that the central bank should slow the pace of aggressive interest rate increases, but the policymakers were still keen to emphasize their focus on combating inflation.

The Fed members said they favored a “restrictive policy stance for a sustained period,” until was on a sustained downward path to 2%, and that was likely to take “some time.”

“That Fed story will remain a key driver of the dollar and global asset market trends in 2023,” said analysts at ING, in a note. “The market has been pretty resolute in pricing further Fed tightening to 4.95/5.00% next spring/summer and then a 200bp easing cycle within two years to leave Fed funds at some kind of neutral 3% rate into 2025. That pricing will no doubt be challenged over the coming weeks and months.”

While the Fed is determined to tame inflation, it is keen to do so while avoiding a major recession that would result in steep job losses.

The December is due on Friday, and is expected to show the economy added 200,000 jobs, which is lower than the prior month. However, ahead of this, the weekly are due later Thursday, and they will be studied for clues of the current strength of the labor market.

rose 0.1% to 1.0612, despite unexpectedly falling in November as high and market uncertainty continue to weigh on Europe’s largest economy despite fading supply chain problems.

rose 0.2% to 132.82, with the yen giving back some of the gains seen since early December after the unexpectedly widened the target range for its benchmark yields, creating speculation that the central bank will reverse its ultra-loose monetary policy later this year.

fell 0.4% to 1.2006, with sterling struggling the day after U.K. Prime Minister promised to bring down by half and make the British economy grow this year.

While these objectives are certainly deliverable, according to the latest forecasts from the Office of Budget Responsibility, the country is currently suffering a wave of strikes and confidence is at a low ebb.

The risk-sensitive fell 0.4% to 0.6804 after outsized gains in the previous session, while fell 0.2% to 6.8750, with the focus now squarely on a Chinese economic reopening, as the country faces a massive spike in COVID-19 infections.

“Away from the Fed, all eyes are on developments in China and whether the liberalization of COVID containment policies can prompt a re-rating of 2023 Chinese and global growth prospects,” ING added.

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