Forex Signals – Dollar bides time ahead of ECB
SINGAPORE/TOKYO (Reuters) – The dollar held steady on Tuesday as investors weighed whether an accommodating turn from the European Central Bank later this week could hit the euro, while the pound nursed losses due to Brexit uncertainty.
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A day after thin holiday trade, the greenback was slightly stronger against a basket of currencies (=USD) at 93.128 and firmed marginally against the euro (EUR=EBS) at $1.1809.
Moves in the Asian day were modest, but had the dollar back under gentle pressure as risk appetite appeared to return to equity markets.
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The Australian dollar stood at $0.7276 and the New Zealand dollar was little changed at $0.6685, having hit lows overnight following a Sunday statement from the central bank which again raised the prospect of negative rates. [AUD/]
The main focus this week is on the European Central Bank’s policy decision on Thursday.
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“The ECB could raise more concerns over a further appreciation in the euro and make some downward revisions to its inflation projections,” said Commonwealth Bank of Australia (OTC:CMWAY) currency analyst Kim Mundy, which would flag easier policy.
“Around eight years ago (when Abe took over), the yen was stronger at around 70 per dollar. But with the current dollar/yen level, there’s nothing much the successor can do currency-wise,” said Daisuke Karakama, chief market strategist at Mizuho Bank.
“The stronger local equity market should be more of a concern instead,” he said. The yen last changed hands at 106.29 per dollar.
The British pound , meanwhile, was the laggard amid a fresh crisis in EU-UK trade negotiations. [GBP/]
A Financial Times report suggesting Britain might legislate to override its Brexit withdrawal agreement prompted the EU to warn there would be no deal if that happened, raising the prospect again of a hard Brexit.
New talks are due to begin in London later on Tuesday.
The pound edged 0.2% lower to $1.3146, after shedding 0.8% overnight, and sat a fraction above a two-week low against the euro at 89.76 pence (EURGBP=).
Some traders also sold sterling against the yen (GBPJPY=), last traded at 139.63, hovering near a two-week low of 139.58 it hit in the previous session.
“The key question for markets is whether the remarks are still mostly brinkmanship as negotiations near the finish line,” said NAB economics director Tapas Strickland. “The mild market reaction suggests markets think so and still sniff a deal.”
Meanwhile, data in Australia showed employment eased over the month to Aug. 22, while last month’s business confidence gained but remained fragile.
Japan’s economy shrank an annualised 28.1% in April-June, worse than the initial estimate of a 27.8% contraction, revised data from the Cabinet Office showed on Tuesday.
Final European GDP figures are due later in the day. | Forex Signals – Dollar bides time ahead of ECB