On Wednesday, the EUR/USD major hit a three-month high at 1.1079, adhering still to the bullish tone. Overall, the risk aversion surrounding the greenback boosted the EUR and gave an additional push to the pair resulting in its best performance since the 7th of January. The latest US economic reports show a weakening in January’s KPIs (Key Performance Index) postponing the expected Fed rate hike in March and weakening the US dollar.
Credits: Image via SouthEastern Star/ Flickr
The pressure surrounding the dollar got even higher as the New York Fed representative Dudley mentioned in his recent release that the financial tightening will most definitely influence FOMC’s (Federal Open Market Committee) decision in the near future. ISM’s (Institute of Supply Management) Non-Manufacturing Index came at 53.5 for the month of January, posting below expectations, while the Service PMI (Purchasing Managers Index) calculated by Markit went down to 53.2. The only positive news for the US dollar came from the ADP report which showed an increase of 250K new jobs for the month of January, meaning 55K above the forecasted 195K, but the release failed to remove the accumulated pressure around the currency.
In the BoE’s MPC (Bank of England’s Monetary Policy Committee) meeting on Thursday, the vote was unanimously in favor of maintaining the bank’s rate at 0.5% in the attempt to keep in focus the 2% inflation target as a way to aid the economic and employment development. Also, there was an anonymous vote for keeping the central bank’s insurance fund which finances the stock of purchased assets at 375 billion pounds.
According to latest reports, December’s 12-month CPI (Consumer Price Index) inflation remained at 0.2% while oil prices were more than 1/3 lower than a year earlier – in sterling terms. Imports were pulled down broadly due to the pound’s slow appreciation since the early 2013s. On an aggregated level, these factors are accountable for the target miss in December, spreading also to November’s Inflation Report miss.
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