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Dollar holds near four-month highs vs euro; market weighs up recovery outlooks
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The dollar edged up as European markets opened on Thursday, having hit a four-month high against the euro during the Asian session, as market participants focused on divergent recovery outlooks for the United States and Europe, and risk appetite waned.
Global stock markets were at their lowest in two weeks after Chinese technology shares sold off due to concerns that they would be de-listed from American stock exchanges.
Concerns about extended lockdowns in Europe also weighed on markets. German Chancellor Angela Merkel’s decision to ditch plans for a lockdown over Easter did little to improve sentiment.
At 0808 GMT, the dollar index was up less than 0.1% on the day, at 92.658, having hit its highest since November 2020, at 92.697, overnight.
“The dollar index (DXY) has just broken the 200 day moving average,” said James Athey, investment director at Aberdeen Standard Investments, adding that the dollar’s next move would be crucial.
The euro was down 0.1% against the dollar, at $1.1807.
On Wednesday, U.S. Treasury Secretary Janet Yellen and Federal Reserve Chair Jerome Powell expressed their confidence in the U.S. recovery during a second day of testimony to Congress.
Stephen Gallo, European head of FX strategy at BMO Capital Markets, wrote in a note to clients that he expected the euro to fall to $1.16 over the next one month.
“The EU’s ‘third COVID wave’, the relatively low vaccine take up rate, and a more subdued fiscal impulse will probably cause the Eurozone’s recovery to lag North America’s by 2-3 months,” Gallo wrote.