Dollar Depreciation Accelerates Amidst European Majors’ Rise

Azeez Mustapha
18 May 2021 | Updated: 18 May 2021

Today, the dollar’s decline accelerates as risk-on appetite returns to the markets. The yen is the second weakest currency. The biggest winners at the moment are European majors. Commodity currencies are lagging a little. Other markets are marginally higher, with European indices trading slightly higher and US futures pointing to a higher close. Due to the weakening of the dollar, gold and oil prices are also rising.

The dollar depreciation continued and dropped against all of its major counterparts, with EUR/USD and GBP/USD both approaching year highs, with the former settling above 1.22 and the latter just below 1.4200.

The dollar dropped after some US Federal Reserve officials said that, despite the recent increase in inflation, they would continue their current ultra-loose monetary policy. During the US afternoon, the dollar gained some ground, but it remained the weakest currency across the FX board.

Fed’s policymakers seem to maintain their dovish view and Dallas Fed President Kaplan reiterated that any rate hike should not happen before 2022. On the other hand, the Fed policymaker also stated that he would support trimming the bank’s QE program rather sooner than later. On the other hand, gold’s prices tended to benefit from the weaker USD despite the US yields rising just a bit.

European Major’s Rise Past Dollar As Attention Shifts to Inflation Results

On Tuesday, Francois Villeroy de Galhau, a member of the European Central Bank’s (ECB) Governing Council and the head of the Bank of France, expressed his thoughts on recent inflation issues while maintaining a dovish stance on monetary policy.

“There is no risk of lasting inflation return in the euro area.” “Monetary policy should remain accommodative.” “French economy to grow at least 5.5% this year.”

With ECB policymaker Mario Draghi downplaying inflation fears and the US dollar index at three-month lows, EUR/USD has reclaimed the 1.2200 level. The spot ended the day at 1.2216, up 0.54 percent on the day, as traders awaited key Eurozone GDP results.

The market value of the US dollar remained the primary driver of the EUR/USD movement. The greenback struggled to find demand during today’s session as investor sentiment improved, and the US Dollar Index (DXY) fell to its lowest level since late February at 89.69.

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Azeez Mustapha

Azeez Mustapha

Azeez Mustapha is a trading professional, currency analyst, signals strategist, and funds manager with over ten years of experience within the financial field. As a blogger and finance author, he helps investors understand complex financial concepts, improve their investing skills, and learn how to manage their money.