The dollar continued to hover near a five-month low versus major peers on Thursday as investors looked to key U.S. inflation data and a European Central Bank meeting later in the day to potentially set the direction for currency markets.
Investors have adopted a wait-and-see attitude all week, sucking volatility from the market and leaving major currencies mostly range-bound.
The dollar index has fluctuated narrowly around the psychologically important 90 level, and was last at 90.137.
The euro rose to a one-week high at $1.2218 on Wednesday only to finish little changed, and was essentially flat at $1.2178 in Asia.
The yen traded at 109.62 per dollar, also little changed from Wednesday and near the middle of the 109.19-110.325 range of the past two weeks.
Economists polled by Reuters estimated the CPI advanced 0.4% in May.
With the ECB, investors will be watching for any clues of an imminent slowdown to its bond-buying program.
While the ECB is widely expected to keep policy settings steady, the euro could be sensitive to changes in the bank’s economic forecasts or any signal that the pace of bond buying could be reduced in months ahead.
In crypto markets, bitcoin held gains from its biggest rally in four months on Wednesday, when it jumped nearly 12%. It last traded little changed at $37,097.02, after rebounding from a three-week low of $31,025 hit on Tuesday when signs of institutional investor caution and regulatory attention drove selling.
· If the ECB avoids taper talk, EUR/USD will sink towards 1.21 in disappointment. But if its confidence in the recovery is so strong that it wants to set the stage for asset reductions now, EUR/USD could soar as the Federal Reserve moves further behind the path to policy normalization.
There are now lots of people in the market questioning the policy of the Federal Reserve. Who they think have underestimated the inflation risk. I believe that the Jackson Hole symposium could be the tipping point for the Fed to change direction and signal its intention to taper later this year.
The EURUSD has spent the past 3 post NFP days biding its time, with little conviction from traders to drive the EUR in either direction, yesterday it did make a brief attempt to rally above 1.2200. However daily resistance at 1.2210 soon put a stop to that. More resistance will be found at 1.2240/60 and 1.2310 should the ECB spring a surprise or if the data disappoints.
Immediate support for the EURUSD will be found first at 1.2150/40 and then 1.2110/1.2090. For me the key area for support is at 1.2060 a sustained break will indicate a more bearish sentiment for the EUR in the short term at least.
· If the ECB avoids taper talk, EUR/USD will sink towards 1.21 in disappointment. But if its confidence in the recovery is so strong that it wants to set the stage for asset reductions now, EUR/USD could soar as the Federal Reserve moves further behind the path to policy normalization.
· Bitcoin rallies 13% jumping above $37,000 after El Salvador passes law to adopt it as legal tender
Bitcoin surged on Wednesday after El Salvador passed a law to adopt bitcoin as legal tender.
The cryptocurrency was trading at $37,176.44 at around 11:42 p.m. ET, up 13% from the previous 24 hours, according to CoinDesk data.
On Wednesday, lawmakers in the Central American country passed a law that made bitcoin legal tender. Among other things, it means prices can now be shown in bitcoin and tax contributions can be paid with the digital currency.
Other cryptocurrencies got a lift as well, and ether and XRP were both trading higher.
Bitcoin is still significantly off of its record high of $64,829.14 that was hit in April.
Reference: Reuters, CNBC
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