Investing.com – The Dollar was higher in early trading Wednesday in Europe, supported by the comments of senior officials of the Federal Reserve, minimizing the likelihood of interest rate cuts, as well as by a new wave of purchases of safe-haven assets on geopolitical tensions.
At 09: 00, the Dollar index, which measures the greenback against a basket of six major currencies, was at 97,36, up nearly half a percent compared to the low of Monday, and 0.1% relative to the closing of Tuesday.
The dollar was stronger against the aussie and the kiwi after the data released in China showed industrial production and retail sales below expectations in April – even before the imposition of new customs duties on its exports to the United States.
The actions of the chinese have, however, rebounded on Wednesday, apparently in anticipation of new stimulus measures from the chinese central bank.
President Donald Trump has called on the Federal Reserve to “match” any inducement on the part of China to compensate for the economic damage caused by its new rates.
However, the president of the Kansas City Fed, Esther George, has warned in a speech that “the lower interest rates could fuel bubbles in asset prices, create financial imbalances and eventually a recession”, and impose liability for all risk to the u.s. economy on “uncertainty of trade policy and the slowdown in economic growth abroad, particularly in China, in the euro area and the United Kingdom”.
The president of the New York Fed, John Williams, has warned that the rates would tend to increase inflation.
“If prices increase, to the extent that this occurs, the effects will be most important, which will boost inflation next year and will probably have negative effects on growth,” said Williams to Bloomberg.
The euro fell after the announcement of the growth of the German economy to 0.4% in the first quarter, a number that had already been overshadowed by the weakness of the investigations of the affairs conducted in April and may. A second reading of the GDP of the euro area is scheduled for Wednesday.
The british Pound lost ground after data released yesterday showed a slight slowdown of the growth of the average wage in march. It is also still under pressure after the deputy leader of the Labour party, John McDonnell, has warned that the multi-stakeholder dialogues on an agreement for the approval of the Brexit were on the point of collapse. The First minister Theresa May said on Tuesday that it was aimed at a fourth parliamentary vote on the withdrawal agreement in the course of the month of June.