The dollar recovers lost ground amidst Fed’s hawkish stance
The US dollar recovered some of the ground lost over the last few sessions, during early Thursday trading. The greenback lost support at the beginning of the week, as hopes of a de-escalation in the war between Russia and Ukraine slowed the demand for the American currency, which is seen as a haven. However, as we approach the end of the week, the markets appear to be refocusing on the inflation narrative and the Fed’s increasingly hawkish stance. Demand for the dollar is growing ahead of the release of US unemployment data later today and the always important Non-Farm Payrolls tomorrow; should the US labour market continue to give signs of strength, that will only increase the Federal Reserve’s determination to bring inflation under control by accelerating the pace of tightening, in a dynamic that may see the currently under-priced dollar reaching for higher levels, especially in relation to the euro and the yen.
Gold prices barely changed during early Thursday trading. The price has remained within a relatively narrow range over the last two weeks, caught between the demand generated by its haven appeal and hedge against inflation, on one side, and the selling pressures generated by rising interest rates and yields, which make the non-yielding gold less attractive. Hopes of a de-escalation in the conflict between Ukraine and Russia, following talks between officials from the two countries, helped to cap the price of bullion, which is still on track to end the quarter with a gain in excess of 7%. However, Moscow’s record at keeping ceasefire promises isn’t the greatest, so it is quite possible that the geopolitical risk will once again rise, a scenario that would could propel gold prices back to above the $2.000 an ounce level.
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