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USD - 92% of Traders expect 75 Basis Points

The US Dollar is again on the rise during this morning’s Asian session after a mixed performance on Friday. The US Dollar is mainly being influenced by three factors; the potential gas crisis in Europe, the latest US employment figures and the inflation rate which is scheduled to be confirmed this Wednesday.

When looking at the US Dollar Index, which gives the value of the US Dollar against six major currencies, we can see that the price has gained momentum once more and is approaching the latest price high. On Friday the price had originally witnessed an increase, but then declined towards the end of the day.

Looking at the EUR/USD this morning the price of the exchange remains very close to parity, as it did the week before. A similar picture can be seen on the GBP/USD but the USD/JPY remains in a sideways trend, as the price has been unable to break through the resistance levels so far. However, this morning the USD/JPY has gained slight momentum so traders will be monitoring any potential breakout.

As mentioned above, one of the main drivers of the US Dollar this morning is the latest European developments which appear to trigger a “risk off market”. Europe’s gas pipeline, which delivers gas from Russia to Europe is currently closed for maintenance but some politicians have given indications that Russia may halt gas exports to Europe altogether.

The French Finance Minister Mr. Le Maire warned over the weekend that there is a strong chance that Moscow will halt gas supplies to Europe. This is a big worry for businessmen and traders alike, as the move is likely going to cause further disruption and higher inflation. This has resulted in a very low risk appetite, witnessed via the European and US stock markets which are all down today.

In addition to the above development causing a demand for the safe haven currency, traders are also monitoring the US Dollar due to its economic outlook. The Federal Reserve has recently become more and more hawkish due to the rise in inflation. Last week both FOMC members Weller and Bullard advised that they would support a 75 basis point rate hike.

The chairman of the Federal Reserve advised that the regulator would analyze the latest inflation figures. The Consumer Price Index is predicted to land at the significantly higher rate of 1.1% which is noticeably higher than the previous month. The fact that Friday’s employment figures were also positive, further indicates that demand and inflation are likely to remain high.

US Unemployment Rate remained at 3.6%, while the Non-Farm Payroll increased by 372,000, which was above the projected 268,000. This is significant for the regulator and market as it allows investors to hope for continued tightening of national monetary policy. According to the CME FedWatch indicator, more than 92% of traders are confident that the Fed will continue to increase interest rates at the next meeting. They are also expected to adjust the basis point value by 75 basis points instead of 50 at the end of this month.

Over the next 2 days, traders will mainly be monitoring the developments regarding the European Gas Pipelines as well as the CPI figure which is scheduled to be released this Wednesday.

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