Dollar touches 16-month high; focus is on retail sales data

The dollar, a haven for investors, hit a 16-month high against its major peers on Monday, fueled by concerns about global growth and inflation, as well as expectations of monetary politics, while investors waited for data on consumption in USA.

The greenback received a boost on Wednesday when data showed that U.S. consumer prices grew last month at the fastest annual rate since 1990, casting doubt on the company’s vision. Federal Reserve that price pressures are transitory, encouraging bets that interest rates will rise earlier than expected.

“I feel like I’m operating in the 1990s, when everyone was paying a lot more attention to what the Fed was going to do,” he said. Joseph Trevisani, Senior Analyst at FXStreet.com. “It’s been a while since we’ve had a real change in comparative sovereign rates and this seems to be where we’re headed.”

The dollar index, which measures the currency against six pairs, hit 95,462 on Monday, its highest level since July 2020, and was later up 0.274% to 95,394.

Demand for dollars softened on Friday, when a report showed consumer confidence fell to its lowest level in a decade, due in part to rising inflation. But it reaffirmed again on Monday after monetary policy makers in Europe and the UK expressed concerns about growth and prices.

Investors will check U.S. retail sales data on Tuesday for clues as to where the dollar will go. The data is expected to show that retail sales rose 1.1% last month, according to a Reuters poll.

Investors will also be attentive to any comments in a virtual summit between the president Joe Biden and the chinese leader Xi Jinping on Monday.

The gains in the dollar index, heavily weighted by the euro, have also been favored by a fall in the single currency, and the president of the European Central Bank, Christine Lagarde, continued to dismiss the market’s bets for a more restrictive monetary policy.

Supply chain bottlenecks and rising energy costs are slowing growth in the euro zone and will keep inflation high for longer than previously thought, Lagarde told the economic affairs commission of the European Parliament on Monday. Inflation in the euro zone will ease next year, he said.

The euro was down 0.49% at $ 1.1386, after hitting a 16-month low.