Euro back above parity, dollar dips after inflation surges

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NEW YORK — The dollar retraced from a

20-year high and the euro broke back above parity, following a

brief dip below, after data on Wednesday showed U.S. consumer

price inflation surged to a more than 40-year high in June.

U.S. annual consumer prices jumped 9.1% in June, the largest

increase in more than four decades, leaving Americans to dig

deeper to pay for gasoline, food, healthcare and rent.

“This morning’s number is staggeringly high. It’s higher

than expected and shows that inflation is going quickly in the

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wrong direction,” said Chris Zaccarelli, chief investment

officer at Independent Advisor Alliance.

The euro plunged to $0.9998 against the greenback after the

data, breaking below the $1 level for the first time since

December 2002, before bouncing back to last trade at $1.0061.

The single currency is viewed as having support at the $1

area.

The dollar index reached 108.59, the highest since October

2002, before falling back to 107.95.

The euro is being hurt as the region faces an energy crisis

sparked by sanctions imposed on Russia due to its invasion of

Ukraine.

“The sanctions that are trying to hurt Russia are also

hurting the European Union,” said Lou Brien, a market strategist

at DRW Trading in Chicago. “They are in a tough time to begin

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with coming out of the pandemic, but this additional layer of

trouble also makes the euro less attractive.”

Concerns about Europe’s outlook have increased since the

biggest single pipeline carrying Russian gas to Germany, Nord

Stream 1, began annual maintenance on Monday. Governments,

markets and companies are worried the shutdown might be extended

because of the Ukraine war.

The Federal Reserve is also expected to hike rates further

than peers including the European Central Bank.

Traders ramped up bets after the inflation print that the

U.S. central bank could raise rates by 100 basis points when it

meets on July 26-27. A hike of at least 75 basis points is seen

as almost certain.

Atlanta Fed President Raphael Bostic on Wednesday said that

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the higher-than-expected June inflation might require

policymakers to consider an increase of 100 basis points at the

meeting.

The ECB is expected to raise rates by 25 basis points at its

July 21 meeting, the first increase since 2011.

The euro’s depreciation is unlikely to influence its rate

path. The ECB is watching the euro exchange rate because of its

impact on inflation but does not target a specific level, an ECB

spokesperson said.

The Canadian loonie gained after the Bank of Canada raised

its benchmark interest rate by a full percentage point,

surprising markets with its biggest rake hike since 1998.

The greenback fell 0.39% against the Canadian currency to

C$1.2967.

The U.S. dollar gained 0.31% against the Japanese yen to

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137.33, after earlier hitting a 24-year high of 137.81.

In the cryptocurrency market bitcoin gained 2.43% to $19,791

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Currency bid prices at 3:00PM (1900 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 107.9500 108.2000 -0.22% 12.844% +108.5900 +107.4700

Euro/Dollar $1.0061 $1.0036 +0.26% -11.49% +$1.0122 +$0.9998

Dollar/Yen 137.3300 136.8750 +0.31% +19.27% +137.8600 +136.6900

Euro/Yen 138.18 137.37 +0.59% +6.03% +138.7900 +137.1300

Dollar/Swiss 0.9794 0.9821 -0.28% +7.37% +0.9829 +0.9752

Sterling/Dollar $1.1905 $1.1885 +0.17% -11.97% +$1.1966 +$1.1828

Dollar/Canadian 1.2967 1.3021 -0.39% +2.58% +1.3060 +1.2938

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Aussie/Dollar $0.6768 $0.6757 +0.16% -6.89% +$0.6803 +$0.6726

Euro/Swiss 0.9852 0.9854 -0.02% -4.99% +0.9883 +0.9807

Euro/Sterling 0.8450 0.8438 +0.14% +0.60% +0.8468 +0.8404

NZ $0.6137 $0.6127 +0.23% -10.28% +$0.6171 +$0.6081

Dollar/Dollar

Dollar/Norway 10.1810 10.2520 -0.70% +15.56% +10.2825 +10.1440

Euro/Norway 10.2454 10.2876 -0.41% +2.32% +10.3055 +10.2413

Dollar/Sweden 10.5393 10.5637 -0.07% +16.87% +10.6232 +10.4750

Euro/Sweden 10.6041 10.6110 -0.07% +3.62% +10.6326 +10.5940

(Reporting by Karen Brettell; additional reporting by Sinead

Carew in New York; editing by Jonathan Oatis and Rosalba

O’Brien)