LONDON: The euro jumped above parity with the dollar on Wednesday as the US currency slipped against its main rivals on worries about the world’s largest economy.
The euro rebounded above a dollar for the first time since mid-September, also helped by expectations of a sharp interest rate hike from the European Central Bank on Thursday.
The British pound and yen also posted strong gains against the dollar, helping them to recover ground after recent large losses.
The dollar fell after “a string of negative (US) economic data released since the start of the week,” noted ActivTrades senior analyst Ricardo Evangelista.
Badly received data, including slower house price growth and weaker consumer confidence, showed that the Federal Reserve’s sharp rate hikes are “beginning to open cracks in the U.S. economy”, it said. he declared.
“The Federal Reserve has raised rates aggressively in an attempt to get inflation under control, and the country’s economy is starting to suffer,” Evangelista added.
The pound jumped more than one percent against the dollar on Wednesday, also gaining a boost from markets hailing the appointment of Rishi Sunak as prime minister.
The move was seen as offering stability to Britain’s economy after weeks of upheaval fueled by predecessor Liz Truss’ tax-cutting budget.
The dollar has also slumped against the yen from recent 32-year highs as the Bank of Japan refrains from raising interest rates.
Stock markets were mostly down on Wednesday as traders digested another batch of profits from some of the world’s biggest companies.
Banks are making big profits as interest rates rise, but bad debts are raising concerns as the global economy is threatened by a possible recession.
Barclays shares fell 0.7% despite the British bank announcing a 10% jump in quarterly net profit.
Google’s parent company Alphabet, meanwhile, reported quarterly results that fell short of market expectations as belts tightened in the digital advertising market that generates its revenue.
Alphabet shares fell 6.8% to $97.35 in aftermarket trading following the earnings report.
They opened down 8.5%.
“When Google stumbles, it bodes ill for digital advertising in general,” said Insider Intelligence analyst Evelyn Mitchell.
“This disappointing quarter for Google means tough times ahead if market conditions continue to deteriorate.”
Wall Street opened lower, with the Dow Jones losing 0.1%.
But the tech-heavy Nasdaq fell 2.1% in early trading, led by Alphabet and shares of Microsoft, which fell 7.9% after the company also reported results on Tuesday night.
In afternoon trading in Europe, London and Paris were down, while Frankfurt held on to a marginal gain.
In recent weeks, stocks have surged as the dollar and bond yields retreated on economic news that could give the Fed a reason to pause interest rate hikes.
Briefing.com analyst Patrick O’Hare said it was unclear whether the companies’ downgraded earnings estimates would cause investors to recalibrate their stock portfolios or pull out of stocks. .
“Today will be a test of sentiment and a measure of the extent to which the weakening fundamental outlook has already been priced into the broader market,” he said.