The U.S. dollar inched up modestly on Thursday but stayed close to recent lows, while the euro softened in anticipation of the European Central Bank’s upcoming decision.
By 04:40 ET (08:40 GMT), the Dollar Index, which tracks the currency against a basket of six major peers, added 0.1% to 97.002, remaining near a two-week trough.
The index has dropped nearly 1.5% over the past seven days, as the greenback found little support despite positive trade news, including the new U.S.-Japan trade agreement and progress talks with the European Union.
Could a short-term dollar rebound be coming?
ING analysts observed, “If the greenback is indeed due a short-term recovery (we still think it is), then that will need to be triggered by data rather than tariff news. But this week has been quiet on data, and that has seemingly allowed some rebuilding of USD shorts.”
Investors are awaiting several key economic reports this week, such as new home sales, S&P Global PMIs, and weekly jobless claims.
ING further noted, “Initial claims have been on a five-week downward trend and continuing claims have plateaued since mid-June. With only eight days until the U.S. jobs report, another strong print today can drive nonfarm payrolls expectations a bit higher.”
They added, “Markets still price in 16bp of easing for September, which is the contract where we see the greatest potential for a hawkish repricing driving some dollar recovery.”
Attention is also on the Federal Reserve, with President Donald Trump — a vocal critic of Fed Chair Jerome Powell — scheduled to visit the central bank later in the day. It remains uncertain whether the two will meet.
Euro dips ahead of ECB meeting
In European trading, EUR/USD slipped 0.1% to 1.1767, with the euro near its strongest level in almost four years, as investors gear up for the ECB’s policy announcement.
After eight consecutive rate cuts, the ECB is expected to keep interest rates steady as it waits for clarity on trade talks between the European Commission and the U.S.
As ING analysts put it, “If the ECB is feeling confident that a trade deal is coming, the risks of a dovish surprise are indeed lower. However, the currency discussion remains a wildcard that poses downside risks for the euro.”
GBP/USD fell 0.2% to 1.3549, reversing some gains after a 0.4% rise the previous session.
The UK has already reached a trade deal with the Trump administration, and with inflation remaining high, the country’s base interest rate is expected to stay among the highest in developed economies.
Yen gains on trade deal optimism
Elsewhere, USD/JPY declined 0.2% to 146.24, marking a fourth consecutive day of yen gains following the announcement of a broad trade agreement between Washington and Tokyo, including a 15% tariff on Japanese imports, down from the initially proposed 25%.
AUD/USD increased 0.2% to 0.6615, and USD/CNY eased 0.1% to 7.1522, reflecting optimism from the Japan trade deal throughout the region.
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