On Thursday, the U.S. dollar inched higher but remained near recent lows, whereas the euro eased as investors awaited the upcoming European Central Bank policy announcement.
At 04:40 ET (08:40 GMT), the Dollar Index, which measures the greenback against six major currencies, edged up 0.1% to 97.002, hovering close to its lowest level in two weeks.
Over the past week, the index has declined nearly 1.5%, as the dollar struggled to gain traction despite positive developments like the U.S.-Japan trade agreement and talks of a potential deal between the U.S. and the European Union.
Is a short-term dollar rebound on the horizon?
Analysts from ING noted in a report, “If the greenback is indeed due a short-term recovery (we still think it is), then that will need to be triggered by data rather than tariff news. But this week has been quiet on data, and that has seemingly allowed some rebuilding of USD shorts.”
Upcoming economic releases include new home sales, S&P Global purchasing managers’ indices, and weekly jobless claims.
“Initial claims have been on a five-week downward trend and continuing claims have plateaued since mid-June. With only eight days until the U.S. jobs report, another strong print today can drive nonfarm payrolls expectations a bit higher,” ING added.
They also highlighted, “Markets still price in 16bp of easing for September, which is the contract where we see the greatest potential for a hawkish repricing driving some dollar recovery.”
Market participants are also closely watching the Federal Reserve, especially as U.S. President Donald Trump — a vocal critic of Fed Chair Jerome Powell — is scheduled to visit the central bank later Thursday.
It remains unclear if Trump, who has frequently criticized Powell for not cutting interest rates aggressively enough, will meet with the Fed chief.
Euro weakens ahead of ECB meeting
In Europe, EUR/USD slipped 0.1% to 1.1767, with the euro near its highest level in almost four years as investors prepared for the ECB’s latest policy session.
The ECB is widely expected to keep interest rates unchanged after cutting them eight consecutive times, as officials await developments in the trade negotiations between the European Commission and the United States.
ING analysts commented, “If the ECB is feeling confident that a trade deal is coming, the risks of a dovish surprise are indeed lower. However, the currency discussion remains a wildcard that poses downside risks for the euro.”
Meanwhile, GBP/USD declined 0.2% to 1.3549, after a 0.4% gain the previous day.
The UK government has already secured a trade agreement with the Trump administration, and with inflation remaining high, the UK’s base interest rate is expected to stay among the highest in major economies.
Yen continues rally
Elsewhere, USD/JPY fell 0.2% to 146.24, extending the yen’s gains for the fourth day in a row following news of a comprehensive trade deal between Washington and Tokyo that includes a 15% tariff on imported Japanese goods — reduced from an earlier proposal of 25%.
AUD/USD rose 0.2% to 0.6615, while USD/CNY dipped 0.1% to 7.1522, reflecting the broader optimism sparked by the Japan trade agreement across the region.
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