The US dollar jumped against the euro yesterday and kept its gains today due to the divergence between the monetary policy outlooks for the United States and the eurozone. The greenback was virtually flat versus the Great Britain pound and somewhat lower against the Japanese yen.
Many Forex market participants believe that the Federal Reserve should raise interest rates relatively soon, perhaps next year. Yesterday’s economic data did not contradict such outlook, as inflation held steady, while manufacturing and housing reports were better than analysts anticipated. Meanwhile, the European Central Bank speaks about additional monetary easing, pushing the euro down. Of course, the ECB has nothing against softer currency as it would help the struggling eurozone economy.
On top of that, the dollar continues to profit from the risk-negative sentiment on the FX market. The conflict in Gaza and the tensions in Ukraine, which intensified after the crash of the Malaysian airplane, make investors prefer safer assets over riskier ones, and the dollar is considered to be one of such safe investment options.
EUR/USD sank from 1.2523 to 1.3465 yesterday and remained near this level as of 1:51 GMT today, trading near the lowest since November. GBP/USD traded near the opening level of 1.7066, while USD/JPY slipped from 101.45 to 101.40.
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