Peter Nurse

Investing.com reports that the U.S. dollar fell on Friday due to strong gains in U.S. stock futures, which reduced the demand for safe haven and after an encouraging turn from the European Central Bank. 

The Dollar Index (which tracks the greenback against six currencies) fell 0.1% to 95.285 at 2:55 am ET (755 GMT). This is its largest weekly decline since March 2020.

After the closing bell of Wall Street on Thursday, strong corporate earnings by Amazon (NASDAQ:), has led to substantial gains in U.S. Equity Futures as well as in stock markets across Asia and Europe. The greenback is often viewed as a safety net in stressful times due to this increased confidence.

With up 0.2% to 1.1456, the euro has seen the greatest gains, on track for its highest week since March 2020. 

That said, the main reason for the euro’s gains was ECB President Christine Lagarde’s following the central bank policy meeting, where she acknowledged the mounting inflation risks and declined to repeat previous guidance that an interest rate increase this year was extremely unlikely. 

“All this has clearly paved the way for markets to speculate quite freely on a change in forward guidance in March (i.e. explicitly signalling the chance of a 2022 hike) and by extension on the pace, size and timing of ECB tightening, “ said analysts at ING, in a note.

Goldman Sachs (NYSE 🙂 expects that the European Central Bank will raise interest rates 25 basis points each month in September and December.

“We think that the post-FOMC 1.11-1.13 range in EUR/USD has now given way to a 1.13-1.15 range, which may hold into the March ECB meeting.”

This thinking could be affected by the release of U.S data Friday, however with more attention on inflation, a sharp decrease in job growth in January because of the Omicron Covid-19 variation is unlikely to affect the dollar too significantly.

Other markets fell, with the close of trading at 1.3590. This is just short of the 2.Week high of 1.3626, which was reached after rates were increased by 25 basis point, as many expected. 

There could be more gains ahead of sterling as nearly half of the BOE policymakers voted for a bigger increase with inflation set to top 7%, more than triple the central bank’s 2% target and over a full percentage point higher than they forecast in December.

fell 0.3% to 0.7117, weighed by Reserve Bank of Australia Governor Philip Lowe preaching patience in terms of rate hikes following the publication of the central bank’s quarterly Statement on Monetary Policy.

Elsewhere, rose 0.1% to 115.09, with the Bank of Japan seen as the most dovish of the major central banks, especially after the ECB’s change in stance.