The Euro climbed up slightly on Thursday as traders were waiting for a European Central Bank meeting. They tried to ascertain policymakers’ views on the Euro’s recent appreciation and its impact on inflation.
The British Pound steadied above a six-week low. However, it may lose more due to growing worries that Britain and the European Union will fail to reach an agreement on the trade deal.
Analysts expect the ECB to keep policy steady. Despite that, investors seem inclined to closely watch President Christine Lagarde’s comments on how the Euro’s jump to a two-year high this month affects the outlook for economic growth and inflation.
Masaru Ishibashi, the joint general manager of trading at Sumitomo Mitsui Banking Corp, stated that the ECB is this week’s biggest event, and there is a lot at stake. While most recently, the Central Bank downplayed inflation, Ishibashi wants to see how Lagarde will approach the present situation in her press conference.
The Euro traded at $1.1821, gaining 0.3% since the previous session. Meanwhile, the British Pound stood at $1.2993, after rebounding a little from a dip to a six-week low of $1.2839 on Wednesday. Still, the Sterling dropped down to 90.98 pence per Euro, approaching a six-week low.
Aidan Yao, the senior emerging Asia economist at AXA Investment Managers in Hong Kong, thinks that it’s possible that the ECB could try to out-dove the Fed if the euro appreciation goes too far. Whether that will be done via shifting to average inflation targeting or other means is hard to say.
What about the U.S. dollar?
The dollar index was steady at 93.172 against a basket of six major currencies. The greenback traded against the safe-haven Swiss franc at 0.9116. It changed slightly to 106.11 yen as well.
In Asia, the Australian dollar tumbled down to $0.7268. Traders worried about worsening diplomatic ties with China over the treatment of the two countries’ journalists. They were also nervously monitoring an outbreak of Covid-19 infections in the state of Victoria. On the other hand, the New Zealand dollar eased slightly to $0.6681.