The dollar continues to decline against its major counterparts as the dollar index heads south for the fourth consecutive week. Commodities and equities are moving higher and the sentiment over the US economy remains mixed though generally confirmed continued purchases of debt which is keeping the bias negative on the dollar opposed to the expected tightening by other banks on high inflation!
We can see this sentiment haunting the euro, especially ahead of the ECB rate decision this Thursday. Inflation is running for the second month above the ECB target areas and data confirmed that the ECB halted its purchases of government bonds last week for the first time in three months which signaled to markets further unease from the ECB's side over rising inflationary pressures.
The euro advanced on the good fundamentals and the weak dollar rising from the low of 1.3688 to record so far the high of 1.3774. Trading is currently around 1.3730-40 which classically is a strong barrier for the euro's trend, as stability above those areas might extend the bullishness initially towards 1.3820 areas.
The pound is also affected by those expectations where the gilts tilted lower and yields continued to rise on expectations the BoE will be forced to soon act on rates amid raging inflation which is projected to soon surpass 4.0%! Sterling versus the dollar today raced to the upside from opening lows of 1.6006 to record the high of 1.6140, supported further by the strong expansion reported in manufacturing activity.
Positive trading for the GBPUSD pair is still evident and stability above 1.6060 and 1.5990 keeps the upside bias intact and might retest 1.6185 where breaching it extends the upside wave towards 1.6300.
As for the USDJPY, the pair moved south confirming the pressure on the US dollar indeed. The pair fell from the highest recorded at 82.14 reaching so far the low of 81.45 which if breached might take the pair further south towards 81.05 areas.
Is the dollar really in a new predicament or are central bankers suffering with inflation facing a new crisis! The interest rates parity will start to affect trading now and falsely provide unwarranted momentum for majors offsetting their prevailing fragile fundamentals like that in the euro areas and UK which will only further complicate the path to recovery while again stimulate the US exports and its stability, so which side of the coin are we going to get this time?!