Australian exchange foreign exchange trading reminds: the Federal Reserve is expected to further raise interest rates, the dollar rose to a one-week high, and there are still differences on whether the European Bank will raise interest rates at the end of the month

The dollar index rose to a one-week high on Thursday after data showed an unexpected drop in initial jobless claims in the US last week, raising expectations that the Federal Reserve may continue to raise interest rates. The market sees a higher probability that the Federal Reserve will continue to raise interest rates after the widely expected 25 basis point rate hike next week. Economists remain divided on whether the European Central Bank will raise interest rates. UK price growth slowed to its slowest in more than a year in June to 7.9 per cent year-on-year, which could ease pressure on the Bank of England to continue to raise interest rates sharply.

The U.S. dollar index fluctuated in a narrow range in early Asian trading on July 21, Beijing time, and is currently trading around 100.78. The U.S. dollar index rose to a one-week high on Thursday after data showed an unexpected drop in initial U.S. jobless claims last week, raising expectations that the Federal Reserve may continue to raise interest rates if the economy remains strong. The U.S. Labor Department said initial state jobless claims fell by 9,000 seasonally adjusted to 228,000 in the week to July 15. Economists interviewed had predicted 242,000.After the data was released, the market saw an increase in the probability that the Federal Reserve will raise interest rates after the widely expected 25 basis points hike next week. Traders in Fed funds futures saw a further 34 basis points of interest rate hikes, compared with Wednesday's forecast of 32 basis points.

Adam Button, chief currency analyst at ForexLive, said: "The market has been looking for signs of layoffs in the US, but none have come to light. The latest jobless claims underscore once again that the US labour market is very strong and the Fed still has more work to do."

Other data on Thursday showed that sales of existing U.S. homes fell to their lowest level in five months in June, weighed down by a chronic shortage of homes on the market, which slowed the pace of year-on-year price declines.

Last week's data showing consumer and producer inflation cooling, suggesting price pressures could move closer to the Federal Reserve's 2% inflation target, followed by a decline in the dollar, which closed 0.55% higher at 100.83 on Thursday.

Investors will focus on Federal Reserve Chairperson Jerome Powell's remarks following the announcement of his interest rate decision next Wednesday for new clues on whether another rate hike is possible in September.

The euro closed down 0.62% against the dollar on Thursday at 1.1128.Economists remain divided on whether the European Central Bank will raise interest rates.

According to the agency survey, all 75 analysts surveyed expect the ECB to raise interest rates by 25 basis points in July, 40 expect another rate hike by 25 basis points in September, and 35 do not expect another rate hike in September.

Bas van Geffen, senior macro strategist at Rabobank, said: "A rate hike in July is pretty much a DingTalk on the board and they have already said they will raise rates and that won't surprise anyone. The question is whether they will raise rates in September. Communication will be the hardest part for the next meeting... whether to sit still or raise rates, they will probably stay open. Either way, it will be a close call."

In addition, the weak economic outlook for the euro area is also weighing on the euro.The eurozone economy has finally avoided a winter recession, with revised data showing it stalled at the start of the year rather than shrinking as previously thought. The latest figures, published on the website of the European Union's statistical office on Thursday, showed flat output in Quarter 1. The figure was up from -0.1%, after a 0.1% decline combined with a similar decline at the end of last year indicated the first six-month contraction in the eurozone since the 2019 epidemic.

"Regardless of whether the eurozone contracts in the winter, the outlook remains persistently weak," said Jamie Rush, an economist. "The squeeze from monetary policy will keep growth sluggish for the rest of the year as the effects of the energy shock pass."

Sterling continued to fall, with data released on Wednesday showing that year-on-year price growth in the UK slowed to its slowest pace in more than a year at 7.9%.This could ease the pressure on the Bank of England to continue to raise interest rates sharplyA key UK mortgage rate also fell on Thursday for the first time in nearly two monthsSterling closed down 0.56 per cent at 1.2866 against the dollar on Thursday.

The dollar closed down 0.33 per cent against the yen at 140.07 on Thursday as the government forecast inflation this year would be well above the central bank's 2 per cent target and acknowledged that wider price rises could keep markets expecting an end to ultra-low interest rates.

Key data and events on Friday

Institutional Perspectives Summary

ABN Amro: The euro may test 1.1100 against the dollar in the coming days.

ING economists said the euro fell back to 1.1200 against the dollar, and the pair has room for further correction. According to ING's short-term financial fair value model, the euro is still overvalued by about 2.5% against the dollar. The euro is more likely to fall from this high level than to recover. The euro may test 1.1100 against the dollar in the coming days;

2. UBS: The pound is expected to recover against the dollar in the coming months.

Sterling weakened after the UK released weaker-than-expected inflation data for June on Wednesday, but it should recover against the dollar in the coming months, UBS economist Dean Turner said in a note. The fall came as investors lowered expectations for a rate rise by the Bank of England, but those expectations are no longer realistic. "In our view, this adjustment does not change the broader picture of the sterling outlook and the pound will still strengthen against the dollar in the coming months." The time it takes for inflation to normalise in the UK should be longer than in the US, which could be a key factor supporting the pound;

3. United Overseas Bank: The New Zealand dollar is currently facing consolidation against the US dollar;

Lee Sue Ann, an economist at UOB, and Quek Ser Leang, a market strategist, believe that the rebound in the case of severe oversold indicates that the New Zealand dollar is unlikely to weaken further against the US dollar. In the next 1-3 weeks, the New Zealand dollar appears to have entered a consolidation phase against the US dollar and will trade in the 6210-0.6370 range.