The US Dollar Index, a measure of the value of the greenback against a basket of currencies, rallied to 91 – its highest since January 2018. The jump up coincided with the rise of the yield on US 10-year treasuries to 3.0315 per cent – just shy of the four-year high of 3.0516 per cent recorded in 2014.
Reaching its lowest level in one month, the Euro dropped below $1.22 before the European Central Bank (ECB) will announce its interest rate decision later today. We anticipate the central bank will leave its benchmark rate unchanged, but our focus will be on the following press conference and ECB President Mario Draghi’s rhetoric about the future path of the central bank’s monetary policy.
The euro has strengthened from its nadir of $1.0342 against the greenback by more than 20 per cent, which unnerved the ECB about potential deflationary effects as a result of a stronger single currency. Should Draghi reference this in the press conference today, we anticipate the Euro will weaken.
EUR/USD attempted a tepid recovery from eight-week lows at $1.2160 in the Asian trades this Thursday, but the bulls appear to lack momentum heading into the European Central Bank (ECB) monetary policy decision due later today at 12-45 London time. Despite the bounce, the spot remains capped below the $1.22 handle, with downside risks still in place amid the ongoing rally in Treasury yields, which continues to keep the USD bulls on the front foot. Beyond today’s low at $1.2158, we look for support at the March 1st low of $1.2153 before the January 4th high at $1.2089. On the upside, yesterday’s high at $1.2245 may offer some resistance before Friday’s high at $1.2352.
Sterling has caught some lift in early Thursday trading, back into the $1.3950 region ahead of the European markets. Cable had been struggling to pump the brakes on a decline that started last week which sees the pair off of its April high of $1.4376. A dollar recovery that kicked off on renewed confidence bled into a surge in USD buyers as 10-year US Treasuries clambered over the critical 3% yield mark. Beyond today’s low at $1.3919, we look for support at the March 16th low of $1.3885 before the March 8th low of $1.3780. On the upside, Monday’s high at $1.4031 may offer some resistance before Friday’s high at $1.4031.
USD/JPY is sticking close to fresh highs made in the overnight session, trading near ¥109.30 ahead of the European market rollover. The Greenback has run up against the Yen for six consecutive trading days as the USD gets bolstered by rising US Treasury yields, and with all eyes on the US GDP figures slated for Friday. The big figure this week will be the Bank of Japan’s rate decision and Press Conference at 023:00 GMT early on Friday. Above today’s high, we look for resistance at the February 8th high of ¥109.30 before the February 8th high at ¥109.78. On the downside, yesterday’s low at ¥108.53 may offer some support before Monday’s low at ¥107.62.
GBP/EUR is broadly unchanged overnight with the pair trading in a very tight range. ECB rate decision and press conference at lunchtime today could be key for today’s direction of travel. Above today’s high at €1.1452, we look for resistance at the last Thursday’s high at €1.1508. On the downside, Monday’s low at €1.1391 may offer some support before Friday’s low of €1.1372 and the March 27th low at €1.1364.