NEW YORK- The euro and sterling dipped against the dollar on Friday as investors bet interest rates would stay lower for longer in Europe and Britain while looking ahead to next week’s US monetary policy meeting.
The dollar index, showing its strongest weekly gain since early May, was last up 0.57 percent on the day at 90.5810 while the euro was down 0.63 percent at $1.2099, on track for its biggest weekly decline since the end of April.
A day after the European Central Bank stuck to its dovish stance, ECB policymaker Klaas Knot said that flexible fiscal rules would be needed for years as monetary policy remains constrained.
“ECB policy makers are indicating that inflation rates are way below levels that are needed to put upward pressure on rates,” said Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto.
“That’s cutting away at the euro’s recent rally, putting some downward pressure on it. The biggest contributor to the move we’ve seen overnight is the (euro) weakness as opposed to idiosyncratic dollar positive forces. The dollar’s winning the reverse beauty contest,” Schamotta added.
Sterling was down 0.54 percent at $1.4098 as traders worried about slower-than-expected growth as the rapid spread of the Delta variant in Britain raised concerns that much of the country may not be able to fully reopen from a COVID-19 pandemic-related lockdown on June 21, as previously hoped.
