The US dollar rose strongly during the European session on Friday, reaching its highest level in 20 years, ahead of the release of US labor market data, which will pave the way for monetary tightening.
The US dollar index rose above the 104 level, to face price resistance and return to trading around 103 levels.
Yesterday the Fed announced a 50bp hike, the biggest increase since 2000, and Jerome Powell, Fed Chairman, indicated that policy makers are not looking for bigger moves than this, but the market is in a state of uncertainty.
In a note to investors, ING analysts say, "Any sustained decline in the dollar's value will require market confidence in the Fed, its regulation of the monetary tightening cycle, and its ability to land safely by the end of the cycle."
"It seems too early to make any decision on the continuing concerns about inflation, the risks, as we've seen over the past 12 months, the Fed has re-pricing higher."
The US economy added 428,000 jobs during the month of April, more than expected, and thus economists believe that the monetary tightening cycle will be stronger to control inflation, which is the most violent in 40 years.
The Fed is putting pressure on other central banks, with Germany's Ifo institute noting that the ECB needs to line up behind the Fed, given the massive rise in Eurozone inflation.
This comes after a statement from Fabio Panetta, a member of the European Central Committee known for his tendency to monetary easing, in a press interview regarding the inability of negative interest and quantitative easing to keep pace with the current economic conditions.
The Euro-dollar recorded last week the lowest level in 5 years at 1.0469, and it is now recording at 1.0555.
ING analysts added: "Challenges in Europe and China are creating unfavorable conditions for the euro." "The offsetting risks indicate that it is difficult to sustain any rise in the euro-dollar pair."
The Bank of England raised the interest rate by 25 basis points on Thursday, for the fourth time in a row, and the pound sterling dollar fell by more than 2% to record the largest daily drop since 2020, and the British economy faces the risks of recession, and the pair is trading near the end of Friday's session from 1.2346.
The yen rose slightly, some hitting a 20-year high last week. While the Australian dollar fell to 0.7072, after the central bank's decision to raise interest rates by more than expected, indicating a strong movement is expected.
The dollar-yuan pair traded at 6.6819, a rise of 18 months, after China's leaders supported the strategy of zero infections in Corona, which means that restrictions will remain in place in the near future, which hinders any efforts aimed at supporting economic growth.