The U.S. dollar held broadly steady around a three-month high Thursday, but was slightly down against the euro before European Central Bank President Mario Draghi was set to discuss the central bank’s monetary policy decision and likely offer his thoughts on growth in the eurozone economy.
What are currencies doing?
The ICE U.S. Dollar Index DXY, -0.06% which gauges the buck against a basket of six currencies, was fractionally lower at 91.170, after reaching its highest level since mid-January on Wednesday, according to FactSet data.
The WSJ Dollar Index BUXX, -0.12% which measures the greenback against a wider basket of currencies, fell 0.2% to 85.14, also pulling back from its highest since January.
The euro EURUSD, +0.0658% bought $1.2186, up from $1.2161 late Wednesday in New York.
The British pound GBPUSD, +0.2943% traded at $1.3966, up from $1.3930 in the prior session and an improvement from a Thursday intraday low of $1.3895. That was the first move below $1.39 in six weeks, FactSet data showed.
The greenback against the Japanese yen USDJPY, -0.22% was at ¥109.24, down from ¥109.43. The Bank of Japan will issue its latest policy decision on Friday.
Read: BOJ’s Kuroda sees potential end to QE, says no currency manipulation in Japan
What’s driving the market?
The euro is in focus Thursday, with traders set for further clues on when the European Central Bank aims to wind down its massive bond-buying program and start to raise interest rates, although little or no action is expected at this meeting.
The ECB in March surprised markets by signaling it’s on track to end its stimulus program before the end of 2018. But since then, economic data have pointed to a slowdown in the eurozone economy. That’s led investors to dial back expectations for the start of rate hikes in the middle of 2019. As well, core inflation at 1% is still well below the ECB’s target of near, but just below, 2%.
The ECB’s policy statement is due at 12:45 p.m. London time, or 7:45 a.m. Eastern Time. Draghi will hold a news conference at 1:30 p.m. London time, or 8:30 a.m. Eastern. The euro traded above $1.24 during the ECB’s meeting in March.
See: 4 outcomes for the ECB meeting, in 1 handy chart
And read: Expect a careful, dovish Mario Draghi
The dollar has enjoyed gains in recent sessions as the 10-year Treasury TMUBMUSD10Y, -1.18% held above a four-year high above 3%. Those moves have come on the back of rising inflation expectations and reinforced speculation that the Federal Reserve will ramp up its pace in raising interest rates this year.
See: What recent CFTC data mean for dollar bulls
Read: Dollar rebound not here to stay: analyst
Economic data
The weekly jobless claim report is due at 8:30 a.m. Eastern Time. Also at the time, March figures on durable goods orders, core capital equipment orders and advance trade in goods are expected.
At 10 a.m. Eastern, data on housing vacancies for the first quarter are scheduled to come out.
See: MarketWatch’s economic calendar
What are strategists saying?
“The problem for the ECB will be how to project confidence without sparking a market reaction that could send interest rates higher prematurely and thereby derail the fragile recovery,” said Marshall Gittler, chief strategist at ACLS Global, in a note.
“I expect that they will present a confident view on the economy — that’s EUR-positive. On the other hand, I think they will also want to calm the markets and prevent any anticipatory tightening in financial conditions – that’s EUR-negative,” he said. “Overall, I would say that from their point of view, the risks of investors anticipating a tightening too early are greater than the risks of them losing confidence at this point, and so I would expect a generally dovish tone that may cause EUR to move lower.”