The US dollar has caught a bid on the auction and rising yield, and the DXY index that measures the US Dollar vs a basket of major rivals is currently up 0.17% to 102.50. The DXY has been trading between the lows and highs of the day, 102.269/102.776. US equities are also falling in midday trade which tends to benefit the greenback as follows in-line NFPs could see traders shift their focus back on the central bank fighting inflation.
Euro exchange rates advanced in the hours leading to Thursday’s European Central Bank policy update where confirmation of a July interest rate rise will likely be forthcoming.
Nevertheless, gains by the Euro suggest investors are actively preparing for a more ‘hawkish’ outcome, i.e. one that could see policy makers confirm a number of rate hikes are needed to bring inflation expectations in the Eurozone back under control.
Foreign exchange strategists at TD Securities say this enthusiasm could be misplaced as they believe the prospects of a meaningful rally in the Euro are limited as the ECB might underwhelm against increasingly hyped expectations.
“Unless Lagarde commits to a series of 50s, EURUSD has limited room to gain,” says James Rossiter, Head of Global Macro Strategy at TD Securities, referencing a potential 50 basis point interest rate rise. (Set your FX rate alert here).
At the time of publication, the EUR/USD is trading a third of a percent higher at 1.0730
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