The U.S. dollar depreciated for the third day in a row on Tuesday as current global market sentiment encouraged investors to reinvest in riskier currencies and reduced bets on the U.S. dollar that eventually caused the U.S. dollar to depreciate from a two-decade high.
Hawkish comments from Dutch central bank chief Klaas Knot have prompted the euro to bounce back above $ 1.05 for the first time since Thursday, dispelling fears the Euro will lose value against the US dollar.
Knot said that not only is the European Central Bank set to raise rates by 25 basis points in July, the central bank is also prepared to consider a larger hike if inflation proves higher than expected.
Kenneth Broux, a currency strategist at Societe Generale in London argues that while markets are still skeptical about a 50 basis point hike in July, they have no doubt that interest rates will continue to rise until the end of 2022.
Following Knot's comments, the euro surged even faster, doubling in more than 1%, to $ 1.0542.
Meanwhile, ECB policymaker Francois Villeroy de Galhau argued on Monday that a weak euro could threaten price stability in the currency bloc. Not only that, concerns that tensions could rise following the Russia-Ukraine conflict that could lead to a gas embargo, a recession in the eurozone and prevent the ECB from raising interest rates.
The sterling also strengthened against the weaker US dollar to jump 1.4% to its highest level since May 5 after strong labor market data strengthened expectations that the Bank of England will continue to raise rates to fight inflation.
On the other hand, the Australian dollar also strengthened with a 0.85% strengthening to $ 0.7031, recovering higher from a two -year low touched last week, and could get an additional boost from interest rate expectations if wage data surpasses expectations on Wednesday. The Australian central bank is considering a more significant interest rate hike.
The US dollar index, which measures the strength of the greenback against six major currencies, fell 0.63% to a trading level of 103.543.
U.S. retail sales reportedly jumped higher in April with a 0.9% increase as consumers bought motor vehicles.
Analysts believe in the short term, the U.S. dollar is expected to remain the driving force in 2022 when the U.S. Federal Reserve. implement a new cycle of monetary tightening.
