Black Friday is Now! Don’t miss out on up to 60% OFF InvestingProCLAIM SALE

Dollar Weakens Ahead of Fed Meeting; Risk Sentiment Climbs

Published 04/26/2021, 03:00 PM
Updated 04/26/2021, 03:01 PM
© Reuters
EUR/USD
-
GBP/USD
-
USD/JPY
-
AUD/USD
-
USD/TRY
-
USD/RUB
-

By Peter Nurse

Investing.com - The dollar weakened in early European trading Monday, with risk sentiment on the rise as economic data point to a global economic recovery ahead of this week’s Federal Reserve meeting.

At 2:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was 0.1% lower at 90.778, near levels not seen since the end of February. 

USD/JPY was 0.1% lower at 107.81, EUR/USD traded up 0.1% at 1.2100, near a two-month high, GBP/USD gained 0.3% to 1.3914, while the risk-sensitive AUD/USD rose 0.3% to 0.7769.

Risk appetite has been boosted of late by strong signs of a global economic improvement, to the detriment of the safe haven dollar, with early April manufacturing activity indicators, released late last week, hitting record highs in the United States and also showing impressive improvement in Europe.

A survey from Germany's Ifo institute due later on Monday is expected to show business conditions continued to improve in Europe's largest economy.

Attention this week will be centered around the latest policy-setting meeting of the Federal Reserve, with the two-day get together scheduled to finish on Wednesday.

The European Central Bank maintained its very accommodative policies last week, with President Christine Lagarde shutting down expectations that the central bank will start to consider easing back its bond purchases any time soon.

Federal Reserve Chairman Jerome Powell is likely to face questions over whether an improving labor market and rising coronavirus vaccinations warrant a withdrawal of monetary easing, but he is likely to take a very similar stance to Lagarde, shunning talk of tapering bond purchases.

“The Fed is unlikely to rock the tapering boat on Wednesday,” said analysts at Nordea, in a note, but “we keep leaning towards higher USD rates, a stronger USD and negative spill-overs to risk assets during Q3. We think a decision on tapering will be taken in September and keep looking for a rate hike from the Fed already in H1-2022.”

Elsewhere, USD/TRY gained 0.9% to 8.4471, with traders keeping a wary eye on the Turkish lira to see if this pair will test its all-time high of 8.58 amid deteriorating relations with the United States, and after the new central bank chief signaled that rate hikes would harm the economy.

The lira has slipped 3.5% in the last three trading days amid reports that U.S. President Joe Biden will recognize the 1915 massacres of Armenians in the Ottoman Empire as a genocide, something that would strain the relationship between the NATO allies.

USD/RUB fell 0.3% to 74.794, as Russia de-escalates the tension on the border with Ukraine and after the country’s central bank hiked its key interest rate to 5% Friday, from 4.5%, in an attempt to stem accelerating inflation.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.