Burr Jeffrey Smith
Investing.com – The dollar is losing ground in early trading on Friday in Europe, but remains well supported after another strong sell-off in US stocks on Wednesday that limited interest in risky assets worldwide.
At 9:00 AM ET, the US dollar, which tracks this currency against a basket of six other major currencies, fell 0.1% to 95.67, but was still on track for gains of about 0.5% in a week dominated by inflation fears and rising Interest rates and, finally, signs of an impending contraction of the US economy due to the Omicron variant of Covid-19.
Initial jobless claims reached a three-month high last week, while disappointing results from the banking sector, and Thursday from Netflix (NASDAQ:) cast doubt on the dominant growth narrative in the past two months.
Geopolitical concerns also limit risk appetite, with US President Joe Biden warning on Wednesday that he believes Russia will invade neighboring Ukraine again. On Friday, Foreign Minister Anthony Blinken will meet with his Russian counterpart, Sergey Lavrov, for talks in order to calm the situation. It was unchanged at 76.64 per dollar, but fell more than 3.5% this week.
The trading day in Europe begins on a bleak note as the UK saw a sharp decline in retail sales and consumer confidence amid rising Covid cases, consumer energy costs and homes. The GfK confidence index hit its lowest level since February, while retail sales fell 3.7% in December. The figures for the month of November have also been revised downwards.
Analysts say the numbers likely reflect a change in spending patterns due to the pandemic, with consumers shopping for the holiday earlier than usual due to fears of product shortages. October sales were exceptionally strong.
“Total consumer spending may not decline this year, given the high levels of savings and catch-up savings in certain service categories,” James Smith, economist at ING, says in a note to clients. “But retail appears to be more vulnerable, especially after two years of above-average product spending. The recent drop in consumer confidence is a potential red flag.”
Sterling fell 0.2% to the $1.3565 level, also down 0.4% against the euro in response. Meanwhile, the euro rose 0.2% to $1.1362, after losing 1.5 cents against the dollar this week as the gap between the monetary policy of the European Central Bank and the Federal Reserve widened. Christine Lagarde, President of the European Central Bank, took a step back on the question of the expected rise in interest rates in her speech on Thursday, despite the fact that general inflation in the euro area exceeds 5%, its lowest level. Since the creation of the single European currency.
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