The dollar rallies against the euro the day after the Fed

New York (awp / afp) – The dollar rebounded against the euro Wednesday after a sharp fall caused by the surprise drop in interest rates by the Federal Reserve (Fed), currency traders now anticipating that d other central banks will take similar action.

Around 9:00 p.m. GMT (10:00 p.m. in Paris), the euro lost 0.30% against the greenback, at 1.1140 dollars. On Tuesday, it had climbed to 1.1212 dollars, a level more seen since the beginning of January.

“The US dollar is recovering from its bout of weakness as the attention of market players shifts abroad, where other central banks may soon lower interest rates,” said Joe Manimbo of Western Union.

The US currency had fallen sharply when the Fed announced a rate cut of half a percentage point between two regular meetings of its monetary policy committee, the first since the 2008 financial crisis.

A fall in interest rates makes the currency concerned less profitable and therefore less attractive to forex traders.

But now the market is looking to the other major central banks, including the European Central Bank (ECB), which is scheduled to hold a monetary policy meeting next week.

According to several analysts, the institution should probably lower its rate on excess deposits, currently set at -0.50%, which would penalize banks choosing to entrust their liquidity to the ECB instead of lending it to businesses and households.

On Wednesday, the Bank of Canada, citing the “substantial negative shock” of the new coronavirus on the Canadian and world economic outlook, cut rates for the first time since 2015. The US dollar suddenly rebounded against the Canadian dollar just after the announcement.

The “economic performance” of the United States also appears as a “key” factor to limit the decline in the dollar, said Han Tan, analyst for FXTM.

It “still seems well positioned to rebound, compared to other major economies,” he added.

This trend was confirmed on Wednesday by the release of two indicators.

The growth of activity in services in the United States on the one hand reached its highest level in a year in February despite the spread of the coronavirus, according to the index of the professional association ISM.

According to the monthly survey by the business services firm ADP, the private sector in the United States also created 183,000 jobs in February, more than expected by analysts.

A good omen before the publication, on Friday, of the official report on American employment. “Good news on this front would leave the Fed more room before having to cut rates again,” said Manimbo.

                            Cours de mercredi Cours de mardi

                            21H00 GMT          22H00 GMT

EUR/USD                     1,1140             1,1173

EUR/JPY                     119,60             119,69

EUR/CHF                     1,0650             1,0686

EUR/GBP                     0,8658             0,8722

USD/JPY                     107,37             107,13

USD/CHF                     0,9560             0,9564

GBP/USD                     1,2867             1,2811

afp / rp



Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.