By Peter Nurse
Investing.com – The dollar rose higher in early European trading on Wednesday, recovering some recent losses, but those gains could be short-lived ahead of comments from Federal Reserve Chairman Jerome Powell from the annual withdrawal at Jackson Hole later this week.
At 02:55 ET (0655 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, rose 0.1% at 93,123. was largely flat at 106.34, while it was down 0.2% at 1.1814.
“The EUR / USD has been subject to some downgrade following an extended rally, but we continue to see the pair’s basic drivers point to further strengthening and we therefore keep our 1-month target of 1.20,” said analyst Francesco Pesole at ING, in a research note.
These basic drivers were illustrated Tuesday by the showed stronger-than-expected business sentiment, while the U.S. fell to its lowest point in more than six years due to concerns over the coronavirus-induced job loss.
In addition, data to be released later in the day is expected to show that the US slowed in July with a 4.3% month-on-month growth forecast for July. Orders rose 7.6% month-on-month in June.
Attention is now focused on US Federal Reserve Chairman Jerome Powell and his speech at Thursday’s guide to the Fed’s strategy going forward.
I expect Powell to use forward-looking guidance to send an informal message that interest rates will remain low for a long time, which feeds into dollar weakness. We can say that we are in a long-term correction of excessive dollar strength, “Minori Uchida, head of global market research at MUFG Bank, told Reuters.
Elsewhere, it was flat at 1.3150, after rising 0.7% against the dollar on Tuesday, as sterling withdrew from a lack of progress in trade negotiations between Britain and the European Union.
Sterling’s net positions jumped to a high of five months and moved into longer net range (+ 3% of open interest rate) in the week ending August. 18, ”said ING’s Pesole.
“In our view, this continues to highlight how the GBP underestimates the risk of an outcome without agreement of the current UK-EU trade negotiations, which in turn marks a not insignificant risk that more stress will be built into sterling in the coming weeks. ”
Fusion Media or anyone involved in Fusion Media assumes no responsibility for any loss or damage resulting from reliance on the information, including data, offers, charts and purchases / sales of signals contained on this site. Be fully informed about the risks and costs associated with trading the financial markets, it is one of the most risky forms of investment.