Economic news

Dollar Steadies as Markets Wait For Fed, ECB

  • AUD rally stalls as oil drop hits sentiment
  • Kiwi slips, other majors rangebound

By Tom Westbrook

SINGAPORE, April 28 (Reuters) - The dollar steadied on Tuesday as currency markets entered a holding pattern ahead of U.S. Federal Reserve and European Central Bank meetings later this week and as a fresh tumble in oil prices cautioned against risk taking.

The greenback was flat against most majors, apart from a New Zealand dollar weighed down by expectations of further monetary easing.

A 5% drop in benchmark Brent crude and a 13% drop in U.S. crude - an ill omen for global demand - also put the brakes on a Australian dollar that has recovered 17% from a 17-year low struck last month.

Markets are looking to any sort of forward guidance from the Fed, which meets later on Tuesday and is due to issue a statement on Wednesday, and for possible further easing in Europe. The ECB meets on Thursday.

“The (Fed) has so many new programs in play, it is doubtful they follow with anything new,” said Stephen Innes, chief global market strategist at AxiCorp.

“The ECB could do something though it is not clear what,” he said. “Hence the reason FX markets are stuck in neutral today.”

The dollar held steady against a basket of currencies at 100.100 - about where it has been parked for a month. It was a fraction softer against the yen at 107.17 yen per dollar and tad firmer on the euro and pound.

The Fed has led the global monetary response to the COVID-19 pandemic by dropping interest rates to zero and aggressively buying bonds and corporate credit - a program it extended overnight to include municipal debt of smaller U.S. cities.

The ECB has had less room to manoeuvre on rates and announced an enormous bond-buying program. But bickering and indecision over a eurozone rescue package has some in the market expecting deeper action still, perhaps as soon as Thursday.

That has seen the euro left behind as optimism about an economic recovery from the coronavirus has put pressure on the U.S. dollar and driven an impressive rally in riskier currencies such as the Australian dollar.

“Whereas the U.S., UK, Australia, China and Japan, if needs be, can go to the printing presses, in Europe you’re constrained,” said Colin Harte, head of strategy at BNP Paribas Asset Management in London.

“I think there’s a little bit of a risk premium that’s creeping in to the euro on concerns about where do we go from here.”

The single currency held at $1.0821. Elsewhere the pound was pegged lower at $1.2412 after Prime Minister Boris Johnson warned it was too dangerous to relax a strict lockdown in Britain.

The Australian dollar eased slightly to $0.6450, snapping four sessions of consecutive gains on optimism for a global economic re-start.

Reporting by Tom Westbrook; Editing by Sam Holmes & Simon Cameron-Moore

Source: Reuters


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