The US dollar is heading to achieve its strongest weekly performance since the year 2022 after the recently announced US inflation numbers caused tremors in global markets, as the US currency strengthened its gains by 1.5% against a basket of six currencies since Monday, which is its best weekly performance since September 2022. Traders reversed their bets on early interest rate cuts by the US Federal Reserve.
In contrast, the euro and the pound fell to their weakest levels against the dollar since November, at $1.0626 and $1.2436, respectively, while the yen fell against the dollar to its lowest level in 34 years, before recovering to 152.86 yen.
It is noteworthy that the increase in consumer price inflation in the United States this week, which reached a higher than expected rate of 3.5% for the month of March, prompted traders to increase bets that the Federal Reserve may reduce interest rates only once this year. This compares with expectations of up to six quarter-point cuts at the start of January.
In a related context, the European Central Bank said on Thursday, April 11, that it is still on track to cut interest rates in June, and pressure on the euro has increased due to growing expectations that interest rates in the euro zone will fall before their counterparts in the United States.
The continued strength of the dollar could cause problems for countries seeking to lower interest rates without undermining their currencies and accelerating a rise in prices, according to a report by the British Financial Times. Markets are betting that the European Central Bank will make at least three quarter-point cuts by the end of the year. Compared to two cuts by the Bank of England and only one or two cuts by the Federal Reserve.
