Forexlive: USD hovers near 2-week high as euro flags ahead of ECB meeting
On Tuesday, the dollar held near a two-week high against its major rivals. A resilient economy and a weakening euro ahead of the upcoming European Central Bank policy meeting reinforced the dollar.
The dollar remained well bid because of higher U.S bond yields. Although rates were off overnight peaks, traders bet the dollar had more going for it than some of its peers.
The euro remained unstable before the ECB meeting on Thursday. ECB is facing mounting pressure to address how to protect the eurozone economy from a prolonged showdown.
In contrast, higher U.S Treasury yields data including fourth-quarter GDP, less fears of a potentially rapid loss in economic momentum have supported the dollar. The dollar index versus other six major currencies was at 96.668 after doing as high as 96.816 the previous day which was its strongest since Feb 2019.
The underlying demand for the greenback remained solid- a sign of confidence over the economic outlook. The demand existed despite benchmark U.S Treasury yields pulling back from peaks observed in late January.
The euro changed slightly at $1.1337 after shedding 0.25% the previous day, when it brushed an 11-day low of $1.1309.
“The ECB meeting is unlikely to provide big surprises, but the euro is getting top heavy as the central bank, after all, is expected to strike a dovish tone,” Kadota at Barclays said.
The AUD was almost flat at $0.7089 after scraping out a 0.2% gain overnight on expectations for further easing U.S-China trade tensions.
The Aussie showed minimal reactions to a series of statements released at the opening of China’s annual meeting of parliament on Tuesday. China is Australia’s primary trading partner, making the Aussie more sensitive to developments in China.
On Tuesday, the immediate focus remains on the outcome of the Reserve Bank of Australia’s (RBA) March policy meeting.
The AUD had taken a big hit last month after the RBA stepped back from its long-standing bias, saying the next move in rates could as well be down as up.
Forexlive: Dollar steadies, Yuan down as China cuts growth target
On Monday, U.S stock markets gained then dropped as concerns that a much anticipated U.S-China trade deal may not deliver significant gains to global growth.
“The dollar firmed, stocks fell, and U.S. Treasuries rose in the broader market, and we are bound to see the dollar gain against some currencies while slipping against others in such a situation,” said Shin Kadota, senior strategist at Barclays (LON: BARC).
Another aspect supporting the dollar and pressing the yuan was the work reports by Li Keqiang- the Chinese Premier at the opening of a 10-day annual meeting of the National People’s Congress (NPC). Li said China would target a GDP growth of 6%- 6.5% for 2019 – being the lowest rate in 30 years support the greenback.
Li also announced significant cuts to the value-added tax (VAT) to support manufacturing.
On Tuesday, the People’s Bank of China set Yuan’s reference rate lower at 6.6998 compared to Monday’s rate of 6.7049.
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