The euro steadied against the U.S. dollar on Monday, trading above $1.18. Investors contemplated the latest U.S. jobs data. This was in preparation for the European Central Bank meeting on Thursday. At the meeting, trades contemplated whether policymakers will agree on more stimulus.
The greenback has plummeted down to more than two-year lows against the euro at the start of September. Traders worried about the strength of a U.S. economic recovery. They thought that U.S. interest rates would stay low for a longer period, just as policymakers had introduced a significant recovery fund in Europe.
Despite the rough beginning of the month, the U.S. currency has steadied in recent sessions, especially after the euro’s last sell-off.
U.S. jobs data, which was released on Friday, has also helped the dollar. According to the U.S. Labour Department report, U.S. employment growth slowed while permanent job losses increased as government funding started running out. Nonetheless, the jobless rate dropped to 8.4% from 10.2% in July. That is a good improvement.
Alvin Tan, the FX Strategist at RBC Capital Markets, stated that even though the U.S. dollar has found a firmer footing lately, the bounce remains tentative. Traders are not expecting any policy changes at Thursday’s ECB meeting. However, they will be listening closely for anything said about the euro after a rally that has almost certainly unnerved some policymakers.
How did the European currencies trade on Monday?
The euro last stood at $1.1841 on Monday, while the dollar index changed slightly at 92.875. However, U.S. financial markets are closed for the Labour Day holiday, and trading volumes will probably be thinner than usual.
The sterling declined by 0.5% after Britain allegedly threatened to override its European Union divorce deal. The currency dropped to $1.3218 while it touched a one-week low of 89.605 pence against the euro.
According to analysts, a sharp decline in U.S. stocks last week also prompted investors to adjust their positions on the greenback. Minori Uchida, the chief currency analyst at MUFG Bank, noted that when stocks become unstable, the yen strengthens. As a result, a stronger dollar and yen bump into each other, while other currencies weaken.