Early on Tuesday, investors continue to stay away from the US dollar as the focus shifts towards what other leading central banks are planning for their respective economies, especially to see if they will make any changes to their stimulus measures. At the time of writing, the US dollar index DXY is trading around 92.29.

A disappointing non-farm payrolls report has dented investor optimism about the Fed tapering asset purchases or turning hawkish anytime soon, in line with Chairman Powell’s cautious tone at the recently concluded Jackson Hole symposium. As a result, markets now turn their attention towards the RBA, ECB and the BOC to assess if they are likely to overtake the Fed in pulling back stimulus as economies recover from the coronavirus crisis.

The spotlight was on the RBA today, which has already started tapering its stimulus measures as the Australian economy started rebounding from the pandemic’s effects well before its Western peers. However, the resurgence of COVID-19 infections due to the delta variant has hurt economic activity again, forcing the government to reimpose restrictions.

On Wednesday, we get to hear from the Bank of Canada and the CAD is already trading close to three-week highs ahead of the meeting. Economists expect the Canadian central bank to hold interest rates unchanged but it could hike rates towards the end of the year despite the economy experiencing a contraction in the previous quarter.

The main highlight of this week, however, will be the ECB’s meeting on Thursday, especially amid rising expectations for a reduction in the PEPP. Encouraging comments from ECB officials over the past week and a stronger than expected rise in inflation are also supporting the hawkish sentiment and helping the Euro trade higher, exerting further pressure on the US dollar.