The euro rallied on Friday. The currency is set for its biggest weekly rise in three weeks. The European Central Bank reaffirmed its dovish stance on its policy meeting, causing the struggling euro to surge forward again.
The Central Bank faced the biggest economic contraction in a few generations this June. So, the ECB policymakers not only extended emergency bond purchases until mid-2021 but also increased them by 600 billion euros to 1.35 trillion euros to help member states finance their coronavirus pandemic response.
Furthermore, policymakers had debated increases of 500 billion to 750 billion euros. According to cautious comments, an extension of the bond-purchase plans and reinvestment programs will likely last to the end of the year. That may benefit the euro.
The euro has climbed up by 0.1% to $1.12395 against the dollar so far. Chris Turner, ING’s global head of markets, stated that there had been a big turnaround on the euro’s sentiment in the last 4-6 weeks. This could be very supportive for the currency depending on the progress on the EU recovery fund.
How did the U.S. dollar fare?
The dollar struggled as U.S. coronavirus infections rose. The euro’s gains also hindered the greenback’s surge. The governor of Texas temporarily halted the state’s reopening on Thursday as coronavirus infections and hospitalizations increased. So far, Texas has seen one of the biggest jumps in new cases.
The dollar declined by 0.1% to 97.251 against a basket of other currencies. On the other hand, the New Zealand dollar surged forward as recent data prompted investors to add risk positions, despite a rise in infection rates. However, the Australian dollar traded at $0.6888, stuck in its $0.68-0.70 range in the past couple of weeks.
Tatsuya Chiba, the forex manager at Mitsubishi Trust Bank, stated that stock prices remained supported thus far. But Chiba doubts that they can retain the current high valuations when more earnings results come in next month. At this point, risk currencies could slip again against the Japanese yen.