Euro recorded a new balance shift against the dollar on Thursday after the US Federal Reserve interest rate decision on Wednesday evening.
The policy-making body and raised in advance of the impression that it was Wednesday, had to say about the taper, but the emphasis was placed on the prospects for inflation and interest rates, With $ 1.1950, the euro has said goodbye to an old bandwidth. We think that the dollar will slowly but surely increase in value in the coming period.
In line with expectations, the US central bank maintained its main interest rate and bond buyout programme. The so-called dot plot now shows two interest rate hikes in 2023, while there was no such increase in March. Nevertheless, the central bank reiterated the view that rising inflation is only temporary.
In the accompanying statement, the Fed reiterated its commitment to use a full range of instruments to support the US economy, with the central bank striving to maximise employment and promote price stability objectives. The central bank aims for an inflation rate that can be slightly above 2 per cent for some time, but anchors itself at 2 per cent over time. The Fed expects to maintain accommodative policies until these results are achieved.
PCE inflation is estimated at a median of 3.4 per cent for 2021, compared to 2.4 per cent in March. The 2022 estimate was revised upwards from 2.0 to 2.1 percent, and the 2023 estimate was revised upwards to a median of 2.2 percent, compared to 2.1 percent earlier. For the long term, the median is set at 2.0 percent.
Indeed, consumer prices in the euro area increased faster in May than in previous months. This was confirmed by Eurostat’s final figures on Thursday.
Consumer price inflation was 2.0% in May, as a preliminary estimate showed. This was 1.6% in April and 1.3% in March.
On a monthly basis, prices increased by 0.3% in May this year, also in line with an earlier estimate.
Core inflation, a key indicator for the ECB, was 1.0% y-o-y in May, slightly above the expected 0.9%. Core inflation, excluding volatile food and energy prices, was 0.7 percent in april.
Gross domestic product growth forecasts were also revised upwards. The central bank foresees a growth rate of 7 per cent in 2021, which was previously expected to grow by 6.5 per cent. The growth forecast for 2022 was maintained at 3.3 per cent, while GDP growth for 2023 was revised upwards to 2.4 per cent, compared to 2.2 per cent earlier.
Inflation in the euro area was definitely 2.0 per cent in May, with core inflation of 1.0 per cent against a preliminary measurement of 0.9 per cent.
So in the United States, the focus today is on those weekly aid applications, the Philadelphia Activity Index for June and the leading indicators for May. Aid applications are estimated at 360,000 as against 376,000 a week earlier.
The number of first applications for unemployment benefit in the United States increased unexpectedly during the week ending June 12. This was shown on Thursday by the figures of the US Department of Labour.
The number of new applications for unemployment benefit increased by 37,000 to 412,000. Economists had anticipated a decrease to 360,000 applications.
The figure from a week earlier was reduced by 1,000 applications to 375,000. The four-week moving average, which is generally less volatile, was 395,000 applications. That’s 8,000 less than a week earlier. The number of extended aid applications in the week ending 5 June was 3,518 million applications, an increase of only 1,000 applications.
In addition, US Treasury Secretary Janet Yellen is today accountable to a House of Representatives Committee for the 2022 budget.
The euro was down 1.4 percent on $ 1.1954 on Thursday. The European currency recorded 0.7 percent lower at £ 0.8550. The British Pound itself fell 0.7 percent on Thursday and stood at 1.3981 dollars. The dollar was up 0.6 percent on 64322, Chinese yuan. Today, the dollar rose 0.6 percent and stood at 110.6665 yen.