The US dollar index is currently trading slightly up. The bearish sentiment remains after the release of weak US inflation and retail sales data. These disappointing statistics have lowered expectations in terms of a further tightening of monetary policy by the Fed.
In Europe, the euro/dollar rate is trading around Friday’s closing price at 1.1465 against a session low of 1.1435. The price restored on the back of positive inflation data from the Eurozone, which was in line with market expectations. The Eurozone’s CPI in June was the same as that for May. Year on year inflation is currently at 1.3%.
The pound/dollar rate has slid to 1.3058, facilitated by the rise of the euro/pound cross, which has restored after three days of falling and a breakout of the trend line.
The main focus of attention among traders is now on the ECB meeting that’s taking place on Thursday. Most interesting for them will be Mario Draghi’s speech given that it’s thought the bank may announce that the QE program will start to be reversed as early as September.
The New York Empire State manufacturing index will be published in today, but this generally has a fairly weak effect on currency markets. If the euro/pound maintains its upwards trajectory as the dollar slides, the euro/dollar rate will keep trading at around 1.1470.
If the cross’ growth stalls at around 0.8775, and the price returns to 0.8755 within the next 3 hours, the euro/dollar’s target of 1.1415 will become more attainable.