On Thursday, the U.S. Dollar rose to its highest level in more than two months against the Euro and the Yen. Pessimism on the U.S. economic outlook weakened ahead of the release of important labor market data.
The GBP fell against the U.S. Dollar but traded around an eight-month high against the Euro ahead of the Bank of England’s monetary policy meeting, which will release conclusions about the possibility of moving to negative interest rates.
Key Notes
Sentiment against the Dollar has improved recently as progress sharpens with mass vaccinations against the coronavirus. U.S. President Joe Biden’s moves to introduce additional fiscal stimulus and improved economic data have forced some bearish investors to abandon their short positions.
The Dollar will face another test on Friday with the release of nonfarm payrolls data, which will help confirm whether the world’s largest economy weathered the recession late last year.
I.G. Securities senior strategist Junichi Ishikawa said that the dollar’s correction was driven by a rebound in yields and rising inflationary expectations.
He further added that this supports the dollar, which now has more room to grow against the Euro because the Eurozone appears to be lagging behind U.S. economic growth.
Against the Euro, the Dollar was at 1.2003, a new nine-week high in terms of the U.S. currency.
The Pound fell to 1.3601, adding to the 0.2% drop in the previous session. Sterling traded at 88.30 against the Euro, the highest since May last year.
The Dollar was quoted at 105.24 against the Yen, the highest since mid-November.
Data is expected to be released on Friday expected to show that the U.S. economy added 50,000 jobs in January, a modest recovery from the previous month’s 140,000 job losses as rising coronavirus infections held back economic activity.
Since the beginning of the year, expectations for large fiscal stimulus under Biden’s Democratic government have buoyed sentiment.
Vaccinations in the United States have also increased, prompting many investors to moderate their pessimism.
Since early December, the Dollar index rose 0.3% against a basket of six major currencies to 91.34, close to its highest price.
The Bank of England is not expected to change interest rates or quantitative easing measures at its meeting on Thursday. Still, the pound will be watched closely as investors try to assess the likelihood of negative interest rates.
In the cryptocurrency market, Ethereum has hit an all-time high of $1,698 ahead of a listing of its futures on the Chicago Mercantile Exchange next week.
Bitcoin, the most popular cryptocurrency, held steady at $37,970.
The Australian Dollar climbed to $0.7626, boosted by hopes for a U.S. stimulus and progress in securing coronavirus vaccines.
The Reserve Bank of Australia will update its economic forecasts on Friday, which could determine if the Australian Dollar continues to rise. The other side of the Tasman Sea says that the New Zealand Dollar fell to $0.7195 against the U.S. Dollar. The NZDUSD is expected to stay in a range and it may regain the lost ground in medium term.
