- ECB’s decision to retain interest rates to target 2% inflation may do little to help the EUR and work against it in the coming weeks.
- Strong US Economy has so far shown signs of absorbing delta variant worries. This may work in USD’s favor as Australia, Japan and Great Britain panic over new containment measures.
The US dollar was fighting to keep its recent against other major currencies on Thursday, as the rising investor affinity for risk shifted some of the investors’ attention to stocks. The dollar index, which measures the greenback’s performance against the six most-traded currencies, had lost marginally by 0.14% by 1405 GMT.
ECB policy decision sees the Euro fighting back, but the USD remains strong
The Japanese yen gained marginally against the USD, trading at 110.155 at 1420 GMT, which was a gain of about 0.12% in 24 hours, a few hours to the start of the Tokyo Olympics. Meanwhile, the Australian dollar shrugged off surging Covid-19 infections in the country to rise for the second successive day against USD. The Aussie gained 0.19% to trade at $0.7372 at 1423 GMT on Thursday, despite spiking Covid-19 cases.
A European Central Bank decision to retain the block’s interest rates at record low levels had little effect on the euro on Thursday. The European trading block has decided to retain its interest rates as a way of achieving its inflation target of 2%. This, however, is likely to do little to help EUR at a time when it has been struggling against USD for weeks.
Following Thursday’s announcement, the euro gained marginally against the US dollar, trading at $1.1805, or +0.12% in 24 hours at 1300 GMT. However, the willingness by the ECB to let inflation rates in the eurozone rise may work against EUR in the medium term.
AUD and GBP fight Covid-19 fears to make marginal gains against the USD
The Australian economy had been performing impressively, with strong export data, but the new containment measures against the highly virulent delta variant have diminished the outlook for the economy. As part of the measures, the Queensland-New South Wales border has been shut, thus limiting the movement of goods.
To affirm the diminished forecast for Australia’s economy, the latest business confidence index released by the National Australia Bank was 17, which fell below analysts’ projection which had placed the figure at 21. The situation seems to be far from stabilizing, after the latest Covid-19 infection figures rose to a ten-month high, with New South Wales reporting record-high daily counts.
The US dollar also lost some ground against the British Pound, losing 0.28 percent against it to trade at $1.3757 at 1414 GMT on Thursday. The pound seems to be on a fightback against the dollar, defying the spike in Covid-19 cases in England to rise from the five-month low slump recorded on Tuesday.
It hasn’t helped matters that England has been hit by the delta variant at a time when the much-anticipated reopening has just come into effect. This may dampen hopes of a better performance by the British economy in Q3 and effectively make the pound lose further ground. Already, there have been calls to re-introduce restrictions, just three days after the reopening.
The dollar may firm further as the week comes to a close
For most of the world’s currencies, it doesn’t help that the US economy is seemingly stoic to the delta variant concerns, for now. However, currencies like AUD and GBP may still hold strong for now, as the largely successful vaccinations earlier in the year are expected to substantially reduce the fatality rate of the virus.
In addition, the US weekly jobs claims data will indicate the performance of the US economy and may tilt the scales against or in favor of the dollar.
EURUSD is currently at $1.18286. The price is currently intersecting with the SMA and looks to be heading up. With bullish support in play, EURUSD is likely to rise to $1.18591. The pair is likely to find the first support at $1.18070. However, if the market turns bearish, the momentum is likely to pull the price to a second resistance level at $1.17769.