ECB Chair's Comments and US Economic Data Keep the Dollar Weaker

JAKARTA - European Central Bank (ECB) President Christine Lagarde's hawkish comments reinforced expectations of further interest rate hikes in Europe. As a result, the US Dollar weakened against a basket of other major currencies at the end of trading Tuesday (Wednesday morning Western Indonesian Time or WIB).

The dollar index, which measures the greenback against six other major currencies, was down 0.20 percent to 102.4918 in late trading.

Inflation in the euro area is too high and is expected to last too long, Lagarde said at a meeting of central banks in Portugal on Tuesday, June 27.

Meanwhile, the US consumer confidence index increased in June with consumer inflation expectations hitting their lowest level since December 2020.

The dollar declined slightly after a report on consumer confidence from the Conference Board showed its index rose to 109.7 in June, its highest since January 2022, from 102.5 in the previous month. It was the highest reading since January 2022 and much higher than economists had forecast.

A consumer confidence reading below 80 often signals a recession in the coming year. Consumers' 12-month inflation expectations fell to 6.0 percent in June, the lowest reading since December 2020, from 6.1 percent in May.

Additional data on sales of new single-family homes in May and home prices in April also indicated the housing market has been able to weather a hike in interest rates from the US Federal Reserve.

The US Federal Housing Finance Agency report showed monthly house prices rose 0.7 percent in April after rising 0.5 percent in March. Prices rose 3.1 percent in the 12 months to April after rising 3.7 percent in March.

"The strength in housing shows risks to the Fed's target of returning inflation to 2.0 percent over the medium term," said Veronica Clark, an economist at Citigroup in New York.

"Household strength over the summer also supports our base case of further rate hikes more quickly," he added as quoted by ANTARA.

Morgan Stanley said on Tuesday, July 27, that it now expects the Fed to raise its key interest rate by 25 basis points in July, from the previous lull expected, increasing its terminal rate forecast to 5.375 percent.

In late New York trading, the euro rose to US$1.0960 from USD 1.0915 of the previous session, and the British pound rose to US$1.2751 from US$1.2721 in the previous session.

The US dollar bought 144.0130 Japanese yen, higher than 143.4470 Japanese yen in the previous session. The US dollar fell to 0.8931 Swiss franc from 0.8949 Swiss franc, and it rose to 1.3182 Canadian dollars from 1.3145 Canadian dollars. The US dollar fell to 10.7178 Swedish krona from 10.7211 Swedish krona.