The dollar is rising. June Fed rate hike still possible by Investing.com

Investing.com – The US dollar gained positions in early European trading on Tuesday, dampening sentiment in risky assets amid deadlock over the debt ceiling and hawkish comments from Federal Reserve officials.

By 08:55 AM ET (0855 GMT), which tracks the currency against a basket of six other major currencies, it had risen to 103,140, ​​not far from last week’s two-month high of 103.63.

US President Joe Biden and House Speaker Kevin McCarthy ended discussions on Monday without reaching an agreement on how to raise the US government’s debt ceiling to $31.4 trillion.

US Treasury Secretary Janet Yellen added to the urgency of the situation by announcing that it was now “highly likely” that her department would run out of cash in early June.

Also read:

With less than two weeks left before a default that would rock financial markets for the first time in US history, the dollar, often a safe haven in times of trouble, has been somewhat sought after.

The central bankers’ comments also boosted the dollar, suggesting that a rate hike in June is still an option.

St. Louis Fed President James Bullard, known for his aggressive stance, announced his support for two more interest rate hikes this year in order to control inflation, while fellow Minneapolis director Neel Kashkari said the central bank should signal next month that tightening hasn’t. It ends, even if it stops next month.

During a conference call on Friday, the Fed chief hinted at a pause in the June central bank meeting, but he may still have to convince many of his colleagues.

The pair fell 0.1% to 138.52, after hitting a near six-month high during the Asian session, reflecting the stark contrast between the still-hawkish Fed and the ultra-cautious one.

However, the yen benefited from data indicating that the Japanese yen unexpectedly rose in May, while growth in the sector hit record highs.

The pair remains mostly flat at 1.0813, pending the release of Eurozone preliminary data for May, which is expected to show a strong services sector supporting the lackluster manufacturing sector.

Pablo Hernandez de Cos, monetary policy chief at the European Central Bank, said on Monday that it must still raise interest rates further to bring inflation down to its medium-term target of 2%.

The pair fell 0.1% to the level of 1.2426 where the preliminary British figures also await, while the very risk-sensitive 0.6653 level is mostly flat at 0.6653 despite the fact that it reflects a certain resistance to the economy.

The pair indicates an increase of 0.2% to the level of 7.0463, and remains close to its lowest levels in six months against the dollar, in the context of uncertainty about the slowdown in the country’s economic recovery.

The pair rose 0.2% to 346.43 ahead of the Hungarian Central Bank meeting, which may cut official interest rates for the first time in three years.

Everything indicates that the European Union, which monitors the highest borrowing costs in the European Union, will cut overnight interest rates by one percentage point this Tuesday, to 17%.