Us Dollar Loses Bullish Momentum Following Shift in Stance By ECB
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Us Dollar Loses Bullish Momentum Following Shift in Stance By ECB

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Azeez Mustapha

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The US dollar continued to show weakness in the European session on Thursday, as the euro extended its gains against the safe-haven currency amid a hawkish change in outlook by the European Central Bank (ECB) last week and the release of the US Consumer Price Index (CPI) later today.

The CPI data release is expected to bring new insights into the pace of the US Federal Reserve’s monetary policy stance as investors brace for better-than-expected CPI numbers that could signal a more hawkish Fed stance.

Reuters revealed that economists expect the CPI to come in at a 0.5% MoM increase in January and 7.3% for the year.

Meanwhile, investors have shifted their expectations for the ECB rate hike after the financial institutions pulled a fast one last week after President Christine Lagarde signaled for the first time that monetary policy tightening could happen this year.

In an attempt to assuage growing concerns of a hard-line action by investors, the ECB president added at her speech on Monday that the bank did not need extensive tightening.

That said, the change in central bank policy expectations, especially the ECB’s, has exerted pressure on the greenback, halting its upward trajectory.

US Dollar and Euro to Remain Range-Bound Due to ECB Adopted Hawkish Stance

Meanwhile, the managing director at Moneycorp, Thomas Anderson, recently suggested that the market could remain range-bound, noting:

“I think the market is kind of scratching its head and saying, ‘OK, corporate earnings are over,’ the Lagarde comments — we’re still kind of scratching our heads. Does this mean this is the inflection point, and we go up from here?”

Also, chief market strategist at Bannockburn Global Forex, Marc Chandler, recently asserted that the dollar and euro were “consolidating within yesterday’s ranges.” Chandler added that: “I think that the bottom line for the ECB and the Fed is there’s a lot of uncertainty, and so they want to maintain maximum flexibility.”

 

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