Home Daily Commentaries Dollar up ahead of ECB meeting

Dollar up ahead of ECB meeting

Daily Currency Update

USD - United States Dollar

The dollar gained against its major counterparts on Tuesday ahead of a European Central Bank meeting this week. The US Dollar Index was up 0.50%, trading around 92.50 at the time of writing.

Demand for USD weakened last week after a key jobs report showed the US added only 235,000 non-farm jobs in August, well below expectations of 725,000.

We expect the US Federal Reserve will now defer any announcement surrounding the tapering of bond purchases into November with a view to reducing QE supports in December. Assuming the current recoupling of global growth optimism and positive sentiment continues we see scope for ongoing USD softness through the coming weeks and months.

Key Movers

Investors remain cautious around being too optimistic about the euro, especially with the European Central Bank meeting looming on Thursday. Klaas Knot of the ECB stated that he is expecting the ECB to begin reducing the pace of its PEPP (Pandemic emergency purchase programme) at the meeting this Thursday with the aim being to end it by March. This is deemed to be positive for the euro, but the ECB has a habit of talking the euro down. So there may be some volatility for both GBPEUR and EURUSD heading into Thursday's lunch time meeting. EURUSD was down 0.22% trading around 1.1844 at the time of writing.

Sterling fell yesterday, pulling back from its near month highs against the dollar and 7-day peak vs the euro, with signs emerging that the economic gains made from post lockdown re-openings may be starting to fade. On Wednesday, The Bank of England Governor and several Monetary Policy Committee (MPC) members are set to testify on inflation and the economic outlook before Parliament's Treasury Committee. Any stance deemed to show that the UK's central bank is looking to raise interest rates sooner than expected and taper their asset purchase program will likely provide sterling a boost.

Demand for the Australian dollar weakened against the US dollar after the Reserve Bank of Australia announced it would cut its weekly bond purchases to $4 billion from $5 billion as previously planned. The central bank has left interest rates on hold at 0.10%. AUDUSD was down 0.71%, trading at 0.7381 at the time of writing.

Expected Ranges

  • EUR/USD: 1.184 - 1.1885 ▼
  • GBP/USD: 1.377 - 1.385 ▼
  • AUD/USD: 0.7377 - 0.7462 ▼
  • USD/CAD: 1.252 - 1.2635 ▲