Dollar skyrockets as virus concerns rise; ECB decision nears
The U.S. dollar traded close to new year-to-date highs on July 21. Notably, concerns about the increasing number of COVID-19 infections prompted gains built on higher interest rate expectations. Moreover, investors are waiting for the European Central Bank decision due on Thursday, which is likely to announce their next clue.
In the previous session, the euro declined to its lowest since April and traded at $1.1772 in Asia. The currency held close to the year’s low at $1.1704.
Other major currencies also faced difficulty escaping multi-month lows. The British pound, the Australian, New Zealand and Canadian dollars were trading under pressure in the Asian session.
The U.S. dollar index, which measures the greenback versus the major currencies, increased by 0.1% to trade at 93.033. According to analysts, that it could test its March high of 93.439.
The risk-sensitive currency, the Australian dollar, took a hit from soft retail sales data and the expectation of more weakness in the near term. As we know, much of the country is in lockdown to slow COVID-19 spread. The Australian dollar fell by 0.3% to trade at $0.7310.
Meanwhile, its New Zealand counterpart stood at $0.6913. The Canadian dollar started falling again after it managed to recover overnight.
The Japanese yen against the dollar was at 109.87, while it stood at 129.37 against the euro.
Remarkably, the seven-day average of daily new infections hit its highest since May. Meanwhile, the average of reported deaths also increased. The British pound faces pressure as the COVID-19 infections increase in the United Kingdom, as the government removed all restrictions.
The ECB has a new strategy that lets the bank tolerate inflation above its 2% target
The pound held at $1.3616, below its 20-day and 200-day moving averages. Additionally, the Singapore dollar also stood close to Tuesday’s eight-month low after the reimposition of some curbs.
The market is focused on ECB’s meeting due on Thursday. Remarkably, a dovish tone is likely after President Christine Lagarde foreshadowed a guidance tweak in an interview last week. The European Central Bank announced a new strategy that lets the bank tolerate inflation above its 2% target. Lagarde announced that policy guidance would be revisited to show the bank’s commitment to the new goal.
According to ING analysts, no change in the ECB decision is unlikely to be enough to lift the euro.
Cryptocurrencies slightly recovered from Tuesday’s losses. Bitcoin fell to a one-month low in the previous session and back over $30,000. Meanwhile, the second-largest cryptocurrency, Ethereum, stood close to 1,870.
- Trading Instrument
User Review( votes)
Get the latest economy news, trading news, and Forex news on Finance Brokerage. Check out our comprehensive trading education and list of best Forex brokers list here. If you are interested in following the latest news on the topic, please follow Finance Brokerage on Google News.