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Title: Euro clings to parity as markets await U.S. inflation data

Jul 13, 2022 01:40AM ET

By: AnalysisWatch

The euro brushed parity with the dollar on Wednesday, with traders fearing the single currency could be forced to levels not seen for decades if U.S. inflation data, due later in the day, yields a sky-high reading.

The greenback held firm in Asian trade, and neither the New Zealand dollar nor the South Korean won got much support from their central banks' planned 50 basis point interest rate hikes.

Analysts say it could fall further if rapidly rising consumer prices in the U.S. keep investors betting on rising U.S. rates.

Economists forecast an acceleration in headline inflation in the US to 8.8% year-on-year in June, a 40-year high, which is likely to bolster expectations of interest rate hikes and help the dollar.

The euro fell below parity with the Swiss franc last month and is flirting with a drop below its 200-day moving average against the pound.

Weakness in the euro and yen has boosted the U.S. dollar index, which hit a two-decade high of 108.560 this week and was hovering around 108.18 in Asian trade on Wednesday.

The Japanese yen has been affected this year by the Bank of Japan's ultra-loose monetary policy, which contrasts with the tightening of monetary policy in almost all other countries.

Sterling has also fallen against a stronger dollar, with analysts seeing it drifting lower following the resignation of British Prime Minister Boris Johnson last week. [GBP/]

It last bought $1.19, with gross domestic product data due at 0600 GMT, the next hurdle. Traders expect May to deliver zero growth.

The Reserve Bank of New Zealand's decision was unanimous, said Jason Wong, strategist at BNZ in Wellington, adding that U.S. CPI will likely drive the kiwi's next move. "We are at the whim of the U.S. dollar."

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