9 Sept 2021
Euro Steadies Ahead of ECB Meeting, Dollar Remains Unchanged
The Index Today
The dollar remained steady on Thursday while the Euro gained a footing ahead of the ECB policy meeting which expected to confirm a reduction in stimulus. The dollar index remained at 92.664 after a continuous 3 day rise.
However, U.S stocks fell overnight as investors feared of a global economic slowdown caused by the Delta variant. This fear was followed by the potential of tapering of the stimulus by the central bank.
Steve Englander, head of global FX Research at Standard Chartered Bank said, “One big difference versus Q4 or Q1 is that the range of economic and inflation consequences is much wider given the uncertainties on how covid and inflation evolve. Investors may be quick to bail out of risk, if it looks like one of these tail risks is becoming more prominent.”
The Euro steadied at $1.1819 after a 3 day decline from Friday’s 2 month high. On Thursday, the ECB is expected to reduce its stimulus package that was initiated during the pandemic. According to experts, the pandemic emergency purchase program PEPP will see a drop in bong buying for as low as 60 billion euros a moth. However, the ECB will still continue to provide support even without the PEPP.
Daisuke Uno, chief strategist at Sumitomo Mitsui Bank stated, “If the ECB board is going to discuss reducing its bond purchase under PEPP, it will make sure that it will continue with its conventional asset purchase program. So it is likely to be a policy change with a caveat. The euro may end up getting little boost in the end.”