Dollar slips as market eyes upcoming Fed action

The dollar edged lower against the euro and sterling on Friday, as the market readjusts ahead of the long weekend and awaits clues on how the Federal Reserve plans to continue tackling still-high inflation.

Several Federal Reserve officials signaled this week that the U.S. central bank likely has to raise interest rates higher to bring inflation back to its desired levels. That hawkish speak coupled with hotter-than-expected economic data has led some banks to forecast three additional rate hikes this year.

Goldman Sachs said it is expecting the Fed to hike rates three more times by a quarter of a percentage point each time, after data this week pointed to persistent inflation and resilience in the labor market, reported Reuters.

“The market is kind of recalibrating itself for the coming months. The most realistic one, I think, is going to be the 25 basis points in March, and then another 25 basis points in May,” said Amo Sahota, director at Klarity FX in San Francisco.