America’s greenback held broad gains that have taken it this week to fresh 11-year peaks against the euro and a currency basket. The dollar’s multi-month stretch of dominance has been driven by signs of improving momentum in the US economy, expectations for higher American interest rates and Europe’s imminent implementation of stronger stimulus to juice the region’s flat-lining economy. The strong US dollar, which also clocked three- and seven-week peaks against sterling and the Swiss franc respectively, has rewarded US importers who astutely pay for their foreign invoices in the local, overseas currency. Euro-denominated bill paying since July has improved in affordability by more than 20 per cent, amounting to markedly lower costs that can be locked in with forward contracts. No policy changes were announced by the Bank of England and the European Central Bank, though markets await some specifics shortly from the latter bank on when it will officially launch its €1 trillion Quantitative Easing stimulus programme. Canada’s loonie defied an otherwise stronger greenback as it settled into a firmer range after the Bank of Canada this week signalled a low likelihood of another rate cut anytime soon.
Euro
A woozy euro held at fresh September 2003 lows against the greenback as markets await specifics from the ECB on its massive stimulus programme. The ECB announced the programme in January and plans to start implementation in €60 billion a month instalments and keep it going until at least September 2016. Putting the monster QE programme into place will flood financial markets with the euro, putting downward pressure on area yields which should take a toll on the value of the single currency. The hope is that it will help fan faster borrowing and spending on the part of consumers and businesses which should put the bloc on a better path for growth.
Sterling
Sterling held steady at three-week lows against its US counterpart. The pound has been pressured by euro-dollar weakness and rising uncertainty over the road ahead for UK politics. Britons go to the polls in May in what could prove the nation’s closest election in modern history. Despite the fresh headwinds, the pound’s decline has been slowed somewhat by Britain’s still solid economic fundamentals that have the Bank of England on a path to boost interest rates over coming quarters – perhaps around early 2016.
US dollar
Disappointing US jobs data caused the dollar to pare some gains as weekly jobless claims unexpectedly rose. Though weaker than expected, markets still expect a pretty healthy US jobs report which should serve as the next big catalyst to drive the dollar. Forecasts call for an increase of 240,000 non-farm payrolls for February, seen as enough to lower unemployment by a tick to 5.6 per cent.