Dollar edges up as jolt from Fed minutes wanes

The U.S. dollar edged up after a flurry of economic data. This includes weekly labor market numbers, in a more muted move a day after a spike higher. This is after following the release of minutes from the Federal Reserve’s meeting. The dollar sharply pared losses of as much as 0.44% after the minutes showed Fed policymakers were concerned about rising inflation. Along with a tight labor market, could result in the Fed’s raising rates sooner than anticipated along with a reduction in its asset holdings.

Traders are currently anticipating a greater than 70% chance for a rate hike of at least 25 basis points. This is according to the CME FedWatch Tool. John Kicklighter, analyst at DailyFX.com in Chicago said that the market is paying attention more to monetary policy and that discrepancy, and that is really what is driving the dollar. St. Louis Fed President James Bullard said that the Fed could raise rates as soon as March. It is in a good position to be even more aggressive against inflation.

U.S. labor market data showed weekly initial jobless claims rose by 7,000 to a seasonally adjusted 207,000. This data comes after a very strong private payrolls report in the ADP National Employment report. This could bolster expectations the Fed will become more aggressive in hiking rates. San Francisco Fed President Mary Daly said that the central bank should raise interest rates this year. Other data showed the U.S. trade deficit widened sharply to $80.2 billion. This indicates a possible weight on fourth-quarter economic growth. The dollar index rose 0.071% at 96.253.

Analysts view 96.40 for the dollar index. This is as a technical resistance point, with a break above likely to result in a test of the December high of 96.91. Steven Ricchiuto, U.S. chief economist at Mizuho Securities USA LLC in New York, anticipated the appreciation in the dollar index will continue into early 2022 toward the 98 level, with an “overshoot” to 100 possible. A report from the Institute for Supply Management showed activity in the U.S. services sector slowed more than expected, due to a rise in COVID infections. The euro was down 0.17% to $1.1294. This is because of the annual inflation in Germany slowed in December for the first time in six months. This remained well above the European Central Bank‘s 2% target.

The Japanese yen strengthened 0.26% versus the greenback at 115.82 per dollar. Sterling was last trading at $1.3532, down 0.16% on the day. Sterling reached a two-month high of 1.3598. In cryptocurrencies bitcoin last fell 0.08% to $43,400.97.