Dollar stabilizes, close to high against euro since November

The dollar stabilized against the euro on Wednesday, but remained close to its high since early November, while the pound appreciated after the latest inflation data in the United Kingdom.

Around 7:20 a.m. GMT, the euro rose 0.03% to $1.1713, falling overnight to $1.1702, the first time since November 4, 2020. The dollar has been benefiting from its safe haven position since the beginning of the week. In addition to the spread of the delta version of Covid-19, investors are concerned about the situation in Afghanistan, where the Taliban completed control of the country on Sunday. “Such an environment of volatility and risk naturally favors the greenback”, commented analysts at ING. For Western Union’s Joe Manimbo, Risk aversion to optimism in global recovery is weak and weak given rising signs of slowdown in Chinese economy. “Geopolitical risk in Afghanistan has also taken a limited risk”, she added.

The publication of the minutes of the last Fed meeting in late July pushed the dollar down very briefly, but a little less yesterday. Feedback “Slightly obsolete as circumstances have changed since then, especially with the development of the Delta version”, told CFRA’s Sam Stovall. Forex traders are looking forward to next week’s Jackson Hole symposium to pick up any clues left here and there by central bankers on the future of their monetary policy.

UK inflation slows

The pound appreciated slightly after the publication by the National Bureau of Statistics (ONS) for a 2% year-on-year decline in UK inflation in July, following a 2.5% increase in prices in June. This data reinforces the view of the Bank of England (BoE), which expects a fleeting peak of inflation, explains MUFG’s Derek Hulkpenny. The institution estimated in early August that inflation in the United Kingdom could decline after temporarily climbing to 4% in the fourth quarter. “The pound is caught between expectations of a rate hike next year and fears of a worst-case scenario for the British economy.”, Tempered Esther Reichelt of Commerzbank. The British currency rose 0.15% to $1.3761 against the dollar and rose 0.11% to 85.11 pence against the euro.

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