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Forex - Euro Hits 2-Week Highs on Hawkish ECB, Dollar at Day’s Lows

Forex Jun 06, 2018 07:30AM ET
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© Reuters. Euro hits 2-week highs on hawkish ECB, dollar at day’s lows

Investing.com - The euro extended early gains on Wednesday to hit the highest level in two weeks after hawkish European Central Bank comments, sending the dollar lower against a basket of the other major currencies.

EUR/USD was up 0.53% to 1.1775 by 07:20 AM ET (11:20 AM GMT), the highest level since May 23.

ECB Chief Economist Peter Praet said earlier Wednesday that officials are increasingly confident that inflation is rising back towards the bank’s target and will next week debate whether to begin gradually scaling back its asset purchase program.

The comments seemed to confirm overnight reports that the ECB’s June meeting could see an announcement on when its monetary stimulus program would end.

Many traders had believed the bank would hold off on giving any new forward guidance this month amid uncertainty caused by political developments in Italy.

The euro extended gains against the yen, with EUR/JPY climbing 0.88% to 129.74.

The dollar was also higher against the yen, with USD/JPY up 0.37% to 110.19.

Demand for the dollar continued to be underpinned after last week’s strong U.S. employment data cemented expectations for a rate hike by the Federal Reserve at its upcoming meeting next week and revived expectations for a fourth rate hike this year.

The pound moved higher, with GBP/USD rising 0.26% to 1.3424, having risen 0.71% on Tuesday.

Sterling was boosted by services data indicating that the British economy is showing signs of recovering from its recent slowdown, reviving expectations that the Bank of England might raise interest rates in August.

The Australian dollar strengthened after data overnight showing that the country’s economy rebounded in the first quarter. AUD/USD was last at 0.7655, after hitting a one-and-a-half month high of 0.7672 overnight.

The Canadian dollar pushed higher, with USD/CAD losing 0.48% to trade at 1.2907, pulling further away from Tuesday’s two-month highs of 1.3066.

The loonie and the Mexican peso fell sharply on Tuesday amid speculation that the U.S. could withdraw from the North American Free Trade Agreement, which underpins trade with Canada and Mexico.

The Mexican peso was hovering close to 17-month lows against the U.S. currency, with USD/MXN last at 20.36 after rising 1.65% on Tuesday.

The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, was down 0.3% to a two-week low of 93.57, as the stronger euro weighed.

Forex - Euro Hits 2-Week Highs on Hawkish ECB, Dollar at Day’s Lows
 

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