US Dollar Steady as Markets Turn Their Attention Towards Euro and ECB Today
Aiswarya Gopan • 1 min read
The US dollar is trading cautious and holding steady in early trading on Wednesday after several days of bullishness as investors turn their attention to Europe and wait to hear from the ECB later in the day. At the time of writing, the US dollar index DXY is trading around 93.01.
During the previous session, EUR/USD dropped to the lowest level seen since three months before posting a slight recovery, but still remains weak under the $1.18 mark. Other major currencies, including the GBP, AUD and NZD also registered slight gains but continue to trade at multi-month lows against the US dollar.
The greenback has benefited from rising expectations for the Fed to turn hawkish and consider pulling back stimulus measures and hike interest rates sooner than forecast, on the back of a rapid economic recovery in the US. In addition, the reserve currency has also been helped by a risk-off sentiment over increasing worries about the spread of the delta variant of coronavirus worldwide, heightening fears that the global economic recovery could be delayed.
Analysts expect the US dollar to enjoy its moment of strength over the next few weeks, at least until the Fed’s annual Jackson Hole symposium that could shed more light on the central bank’s strategy in the coming months. Also closely watched will be COVID-19 developments around the world, which would have a significant impact on the market sentiment and dictate trends in investors’ mood towards the safety of the US currency.
Looking ahead, on the economic data front, all eyes will be on the ECB meeting scheduled for later in the day. Although markets are not expecting any change from the dovish outlook, if the strategic review could signal further dovishness in policymakers’ tones, EUR/USD could trade even weaker.