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LONDON (Reuters) – The price fell to its lowest level in a week at the start of Thursday’s European session and there was a slight “risk” in the currency markets as attention was drawn to the European Central Bank’s political meeting.
Weaker US consumer price data on Wednesday helped allay fears of a possible spike in inflation if economies reopen after the COVID-19 pandemic. US Treasury bond yields fell from their recent surge.
At the European Central Bank meeting, policymakers are expected to prevent bond yields from rising further and affecting the bloc’s economic prospects.
The bank is expected to signal faster money pressures but no longer add to its already aggressive policy package.
The ECB’s policy decision will be made at 1245 GMT, followed by a press conference at 1330 GMT.
ING’s analysts wrote in a message to customers that they do not expect the euro to be the focus of the discussion as it has fallen since the last meeting. The euro-dollar pair is being driven more by dollar factors such as government bond yields, according to the ING.
At 08:34 GMT, the dollar fell 0.2% against a basket of currencies to 91.606 after falling from its three-month high of 92.506 on Tuesday.
The euro rose around 0.3% against the dollar to $ 1.19585. It’s down 2.1% so far this year.
“If central bankers signal that they are ready not only to exhaust their current asset purchase program, but even to extend it in response to a further rise in yields, this could dampen possible interest rate expectations and put pressure on the euro . ” “wrote the strategist of Commerzbank (DE :), Thu Lan Nguyen, in a message to the customers.
“I would not expect any significant impact, however, as the market is only expecting rate hikes in the euro zone in the very distant future compared to the US,” she said.
Elsewhere, the currency markets showed signs of a slightly increased risk appetite.
The Australian and New Zealand dollars rose to their highest level in a week against the US dollar for the third year in a row, aided by rising commodity prices.
The Norwegian krone was its strongest against the euro in just over a year. The pair changed hands at 0818 GMT at 10.032 a.m.
Later in the day, the focus will be on an auction of 30-year US Treasuries. An auction of 10-year bonds on Wednesday generated sufficient demand and helped allay concerns about investors’ ability to offset a debt surge needed to fund the pandemic response.
“Given the central importance of government bond yields in the current market narrative, the auction should be a major driver of risk appetite: Another reaction to yields (even with a somewhat weak auction) could and continue to leave more room for risk stabilization Take advantage of pro-cyclical currencies while keeping the USD under pressure, “ING said.
As a safe haven, the Swiss franc fell against both the dollar and the euro.
The Japanese yen fell around 0.2% against the dollar to 108.605.
US President Joe Biden’s $ 1.9 trillion COVID-19 aid draft, which was finally approved in the House of Representatives on Wednesday, also helped improve risk appetite.
Elsewhere, Bitcoin was a little lower, falling 2.2% on the day to $ 54,640. The cryptocurrency has recovered some of its recent losses, but did not break its all-time high of $ 58,354.14, which it hit on Feb.21.