Peter Nurse

Investing.com – The dollar edged lower Thursday, consolidating just below its 16-month high, while the Turkish lira slumps ahead of the country’s latest central bank meeting. 

The Dollar Index (which tracks the greenback in relation to a basket six currencies) traded 0.1% lower at 95.775 at 2:55 PM ET (755 GMT) after reaching its highest level since July 2020 at 96.226 on Wednesday.

The index edged up to 1.1324 after recovering from its plunge below 1.13 in July 2020. It was at 114.08 and had been flat since then.

The dollar has benefited in recent weeks from the market’s assessment that the Federal Reserve will be quicker to move against the rising inflation levels than many of its advanced economy contemporaries, a perception reinforced in the last month by strong labor market and retail sales data.

Christine Lagarde, President of the European Central Bank, has stated this week that she does not want to see any early interest rate increases. However, the Bank of Japan will continue to add stimulus to Japan’s beleaguered economy alongside a significant fiscal stimulus package, which Prime Minister Kishida is to unveil.

One exception is possible among G7 central bankers: the Bank of England. After a rise in Britain’s October Inflation, pressure was placed on it to raise rates next month.

“We had felt the 96.00/96.10 area would be a good target for DXY [the dollar index] this month,” said analysts at ING, in a note. “We are reluctant to chase the move higher through these big resistance levels (96.10 being the 50% retrace of last year’s DXY drop), but the factors that got DXY here look unlikely to abate soon.” 

Thursday’s major economic data release is the weekly number. This will show that there were 260,000 claimants last Friday, a decrease from 267,000 previous week and a new low post-pandemic.  

In Turkey, President Recep Tayyip Erdogan has continued to exert pressure on the country’s central bank to lower interest rates, and Turkey’s central bank is expected to deliver later Thursday despite a weakening currency and elevated levels of inflation.

Bloomberg polled all 24 economists, and only two expected Governor Sahap Kavcioglu’s decision to lower the benchmark for the next meeting. After lowering its benchmark rate by 300 basis point over the past two gatherings, it has been reduced by 300 basis points.

In anticipation of a rate cut, the lira rose 0.9% from 10.7041 to 10.7041 As Erdogan’s intervention in monetary policies has been more direct, the lira already has a nearly 30% drop against the dollar.