Euro/Dollar Pair Treading Water as Traders Wait for Clues about Rate Direction

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On Tuesday, the euro managed to remain steady against the US dollar and most of the other currency pairs remained unchanged, as traders were waiting for US inflation data figures later in the week, along with some other clues from governors of central bank regarding the direction of the interest rates. Last week, central banks aimed to push back against expectations of a rise in interest rate, which send both the pound and the euro tumbling. However, now it appears that the currency markets have once more settled into a spell of low volatility. On Tuesday, the euro remained unchanged as it was at a value of $1.1581. 

The dollar index had also not moved much, as it stood at 94.030. Most market and currency analysts remained constructive where the US dollar is concerned. This was primarily because of their prediction that the dollar would soon receive further support because of divergence in expectations regarding interest rates with the United States would shrink soon. Market analysts said that it is only when the US CPI comes nearer that a better direction would be available and a clearer outcome can be determined. It is expected that the data will indicate a rise in Chinese factory gate prices as well as in US consumer prices in the month of October. 

Before the inflation data is released, a number of central bankers are also scheduled to speak later on Tuesday. This includes Christine Lagarde, the President of the European Central Bank (ECB), as well as Jerome Powell, the Chairman of the Federal Reserve (Fed). Other strategists have also noted this week that they have not gone from an expectation of no increase in interest rates from the Fed to a rate hike that’s expected to happen in 2022. However, it is important to note that these strategists have not changed their forecasts for the US dollar and the current market price is considered ‘too aggressive’ for future increases in rates.

In other news, the yen reached a four-year low in the previous month before it rose to a high of 112.73 against the dollar. The last value of the yen against the dollar was 112.95, which left the greenback down for the day by 0.2%. Last week, Sterling was hammered because of the surprise decision of the Bank of England to keep the interest rates on hold. On Friday, it had reached a low of $1.3425, but it made a recovery of 0.1% to reach $1.3577. 

There was also a 0.1% in the New Zealand dollar, as it reached a value of $0.7163, after jumping a bit on Monday. The currency has received the support of traders who are concerned about the possibility of a raise hike by the Reserve Bank of New Zealand later this month by almost 50 basis points. There was also a 0.2% fall in the risk-sensitive Australian dollar as it was trading at $0.7407. Bitcoin also saw an increase that brought it to a record high of $68,564 and even pulled ether up with it to a record high of $4,800. 

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