On Thursday, the euro value was on a two-month low, ahead of a European Central Bank summit. Growth in the currency zone weakens, and this could indicate monetary easing.
Opinions toward the single currency took a setback. It was after data showed Germany’s manufacturing sector contracted at the fastest pace in seven years.
Meanwhile, French business growth suddenly decelerated, sending European bond yields lower.
On Thursday, after North Korea fired two short-range missiles into the sea, emerging currencies weakened. It has a diminished appetite for riskier assets in the region.
However, investor focus in Asia remains mostly on the global central bank and political developments. This is in particular to Europe and the United States.
On Wednesday, since Boris Johnson took office as Britain’s new prime minister, Sterling held onto gains it made.
But investors are still cautious of a no-deal Brexit in which Britain would leave the European Union without a trade agreement.
The dollar found backing after U.S. Treasury Secretary Steven Mnuchin said he would not promote for a weaker currency.
Investors are focusing on the ECB’s conference on Thursday next week. Markets are widely anticipating an interest rate cut from the U.S. Fed.
Anticipations of Measure for Currencies and Bond Yields
Both are expected to order the measure for currencies and bond yields in the coming months.
A general manager of fixed income business solutions at SBI Securities in Tokyo, Tsutomu Soma, said, “I see more declines for the euro because there are no good signs coming from Europe at the moment.”
He also indicated not to expect the European bond yields to increase anytime soon. The U.S. is towards lowering rates, which used to be a backing factor for the euro, but that’s no longer the case.
Since May 31, it has touched its lowest at $1.11270. The common currency EUR/USD traded at $1.11415.
The United States and China’s trade war weakened the global economy, dropping euro value to 2.0% so far this month.
Assumptions of ECB Linking with Other Central Banks
Meanwhile, the speculations of ECB joining other central banks in easing policy are increasing.
According to interest rate swaps, European policymakers will lower a key deposit rate by ten basis points to minus 0.50%, and a 48% probability is seen by traders.
On Thursday, economists say President Mario Draghi could flag a rate cut for the next policy meeting in September.
Releasing of a closely watched index of German business sentiment by the Ifo institute will be on Thursday. Additional clues about the health of Europe’s largest economy will be provided.
Sterling rose at $1.2484, performing a modest recovery from a 27-month low of $1.2382 reached last week.
Johnson assured in his first speech as prime minister to lead Britain out of the EU on Oct. 31. He promised with “no ifs or buts” and advised there would be a no-deal Brexit if the bloc declined to negotiate.
On a nearly one-week high of 108.290 yen, the dollar traded at 108.200 yen.
In a news report interview, Mnuchin stated that the United States profits from the greenback’s standing as the world’s reserve currency.
A White House statement also supported the dollar. These are the top U.S. negotiators that will meet at a Chinese counterpart in Shanghai starting July 30.
The world’s two biggest economies are in search of a motion to their bruising trade war.
On Wednesday, the dollar index, which gauges the greenback against six major currencies, was firm at 97.701 after touching an eight-week high of 97.810.