MW: Dollar lower,euro firms as central bank uncertainty dominates
The dollar eased against its major counterparts in Thursday trading with focus on expected inaction by the European Central Bank but continued scrutiny of broader central bank policy persisting as the major policy-setting panels all meet this month.
The ICE Dollar Index DXY, -0.33% a measure of the buck against a basket of currencies, fell 0.4% to 94.60.
The euro EURUSD, +0.4538% rose 0.5% to $1.1294 ahead of Thursday’s European Central Bank’s policy meeting, where the central bank isn’t expected to introduce new stimulus. The euro was worth $1.1239 late Wednesday in New York. The pound GBPUSD, +0.0600% firmed 0.1% to $1.3359 compared with $1.3342.
The ECB will deliver its latest monetary policy decision, due at 7:45 a.m. Eastern Time. Conviction is growing that the central bank will prolong its asset-buying program beyond March 2017, but opinion is divided as to whether the move will come at Thursday’s meeting.
“We don’t expect any fresh stimulus measures from the Bank at this meeting either, for a variety of reasons,” said Charalambos Pissouros, currency analyst with IronFX Global.
“The European markets responded to ‘Brexit’ with encouraging resilience ... while the bloc’s July data showed that ‘Brexit’ risks have not materialized as feared, at least not yet,” he said. “All these combined with the fact that the Bank’s previous easing measures are still making their way into the real economy, make a strong case for the Governing Council to take the sidelines for now and wait for more data before deciding on any new stimulus.”
Read: Pressure mounts on ECB to do QE3 — what to watch at today’s meeting
Investors will listen for clues when ECB President Mario Draghi holds his press conference after the meeting at 8:30 a.m. Eastern.
The Japanese yen strengthened against the dollar amid skepticism about the Bank of Japan’s ability to take further easing measures this month. The Bank of Japan is set to release a review of its monetary policy on Sept. 21.
One dollar USDJPY, -0.19% bought ¥101.59 Thursday, compared with ¥101.74 late Wednesday in New York.
Investors this week have also trimmed bets that the Federal Reserve will raise U.S. interest rates when the panel next meets in a couple of weeks after a surprisingly weak report on the U.S. service-sector on Tuesday. The report followed data last week that showed slower job growth in August and an unexpected pullback in ISM’s index of monthly manufacturing activity.
As for Thursday’s calendar, the Labor Department will issue its report on weekly jobless claims at 8:30 a.m. Eastern. The number of people filing for unemployment benefits is expected to slightly increase to 265,000 in the week ended Sept. 3.
Federal funds futures show that investors see a 18% chance that the Fed raises rates at its Sept. 20-21 meeting, according to CME Group. That’s down from about 30% earlier this week.
Expectations for lower rates tend to weigh on the dollar by making it less attractive to yield-seeking investors.
