CANBERA (dpa-AFX) - The U.S. dollar spiked higher against its major trading partners in the European session on Thursday, as short-term U.S. treasury yields rose in reaction to comments from Federal Reserve Chair Jerome Powell, signaling a liftoff in interest rates in March and the prospects of an aggressive policy tightening in the subsequent meetings this year.
Powell stuck a more hawkish tone at his press conference, saying that the central bank has 'quite a bit of room' to raise interest rates without threatening the labor market.
The Fed chief refused to rule out hiking rates at every meeting, raising the possibility of more than three hikes by the end of 2022.
In its statement, the Fed said that it would be appropriate to raise rates soon in the wake of high inflation and a strong labor market.
'With inflation well above 2 percent and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate,' the statement said.
Markets are assigning more than a 60 percent possibility of the Fed raising its policy rate by 50 basis points by May.
Preliminary data from the Commerce Department showed a sharp increase in U.S. economic activity in the fourth quarter of 2021.
The report said real gross domestic product spiked by 6.9 percent in the fourth quarter after jumping by 2.3 percent in the third quarter. Economists had expected GDP to surge up by 5.5 percent.
Data from the Labor Department showed that initial jobless claims pulled back in the week ended January 22nd following a bigger than expected increase in the previous week.
The report said initial jobless claims fell to 260,000, a decrease of 30,000 from the previous week's revised level of 290,000.
Economists had expected jobless claims to drop to 260,000 from the 286,000 originally reported for the previous week.
The currency has been trading in a positive territory in the previous session.
The greenback added 0.7 percent to touch a fresh 2-week high of 115.43 against the yen. The pair had closed Wednesday's deals at 114.64. Further rally in the currency may challenge resistance around the 118.00 level.
The greenback jumped to its highest level since June 2020 against the euro, at 1.1135. The pair was worth 1.1241 when it closed deals on Wednesday. The greenback may face resistance around the 1.10 region, if it gains again.
Survey results from the market research group GfK showed that German consumer confidence is set to improve in February.
After two consecutive declines, the consumer sentiment index rose to -6.7 in February from revised -6.9 in January. Economists had forecast the index to fall to -7.8.
The greenback climbed to 1.3358 against the pound, its strongest level since December 23 and marking a 0.8 percent gain from Wednesday's close of 1.3459. The greenback is seen facing resistance around the 1.31 area.
The Distributive Trades Survey from the Confederation of British Industry showed that UK retail sales declined below seasonal norms in January due to the tightened Covid restrictions amid the spread of the Omicron wave.
A net 23 percent of retailers said sales were seen as poor for the time of the year in January compared to -2 percent in December. This was the biggest fall since March 2021.
The USD/CHF pair rose to 0.9323 for the first time since November 26. At yesterday's trading close, the pair was quoted at 0.9230. Next near term resistance for the greenback is likely seen around the 0.96 level.
The greenback appreciated to over a 1-year high of 0.6596 against the kiwi and a 1-1/2-month peak of 0.7061 against the aussie, up from Wednesday's closing values of 0.6650 and 0.7114, respectively. The greenback may locate resistance around 0.645 against the kiwi and 0.68 against the aussie.
The greenback advanced to nearly a 3-week high of 1.2727 against the loonie around 2:45 am ET, but it has since eased off to 1.2650. The greenback was trading at 1.2665 against the loonie at yesterday's close.
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