The dollar gained and the euro fell as far as a seven-month low yesterday following a Reuters report that the European Central Bank is weighing further easing monetary policy soon, including buying more debt and charging banks for hoarding cash.
The policy divergence between the ECB and the Federal Reserve, which is seen raising rates as soon as next month, helped propel the dollar index to its highest level since March, which pushed oil and commodity prices sharply lower.
European stocks rallied and Wall Street was little changed, leaving an MSCI measure of equities globally up 0.2 per cent. Data showed a decline in US jobless insurance applications, while business investment is poised to rise.
The Dow Jones industrial average rose 5.95 points, or 0.03 percent, to 17,818.14, the S&P 500 gained 0.27 points, or 0.01 percent, to 2,089.41 and the Nasdaq Composite added 11.17 points, or 0.22 percent, to 5,113.98.
European stocks rallied further and the FTSEuroFirst 300 index of leading shares was up 1.4 per cent at 1,502.6 points.
“The bias of the ECB is to continue to lean towards a policy of easing; with monetary policy being what it is it will continue to keep equities as the asset class of choice,” said Matthew Kaufler, portfolio manager at Federated Investors in Rochester, New York.
“Putting aside geopolitical risk, European markets will continue to strengthen.”
The backdrop of geopolitical risk was heightened earlier this week after Turkey shot down a Russian fighter jet.
Russia said yesterday it will send an advanced air defence system to reinforce its air base in Syria and consider cancelling a raft of joint business projects with Ankara. Volatility could also spike as low volumes are expected out of the United States as it heads into the Thanksgiving holiday. US equity markets will close today and operate a half day tomorrow.
At its meeting next week the ECB will ease policy in some way or another, according to economists polled by Reuters, many of whom say the bank cannot pull back now after signalling its intentions so clearly over the past month.
The euro hit a session low of $1.0565 but sharply reversed losses and was last down 0.1 percent at $1.0631; the dollar index reached a high of 100.17 and was last up 0.2 per cent at 99.68.
The dollar strength, alongside concern over growing crude supply, pressured oil prices lower.
US crude fell 1.2 per cent to $42.37 per barrel and Brent dropped 1.5 percent to $45.42.
Prices of metals such as zinc and copper resumed their recent downtrend.