The dollar was relatively steady on Wednesday, managing to retain its recent small gains. Investors are waiting for upcoming U.S. inflation data, along with a European Central Bank meeting to gauge the pace of global economic recovery. They also hope to get a hint about policymakers’ plans concerning stimulus spending.
Traders have piled up bets against the greenback. However, they are now growing nervous about whether the flow of enormous monetary stimulus will end soon. They are also concerned that interest rate spikes could end a 15-month dollar downtrend.
Meanwhile, some investors contemplate the possibility of the dollar’s rally if U.S. inflation skyrockets higher than the 0.4% monthly clip that analysts expect. In that case, the Fed may decide to taper the stimulus sooner than intended. Traders also watch closely for the signs of an imminent slowdown to the ECB’s bond-buying program.
Both reports are due on Thursday. Hence, the forex market is now in a wait-and-see mode. As a result, major currencies lost their volatility.
On Wednesday, the euro remained steady at $1.2179 in the Asia session. Meanwhile, the greenback traded at 109.47 Japanese yen.
The U.S. dollar index stood at 90.077 during the session. ING strategists Petr Krpata, Chris Turner, and Francesco Pesole stated that they look for a calm day in forex markets today, considering the upcoming May US CPI and the ECB meetings. They added that the G10 dollar crosses would likely remain largely rangebound.
How Did the Australian Dollar and Kiwi Fare?
The Australian and New Zealand dollars fluctuated in narrow bands on Wednesday. The Aussie traded at $0.7744, and the kiwi exchanged hands at $0.7199.
On the other hand, the Sterling climbed up slightly higher. Despite that, it remained stuck within recent ranges. Traders contemplated whether surging cases of the COVID-19’s Delta variant in Britain could delay business reopening plans scheduled later in June. The Pound last bought $1.4168.