The dollar remained on a mixed footing while a shifting in the FX market winds had it on course for a general gain on the week. Timely and reassuring words this week from the chief of the European Central Bank helped put the closest thing to a floor under recently frazzled global financial markets. Mario Draghi said the ECB would ‘reconsider’ increasing its dosage of monetary stimulus to the 19-nation area at bankers’ next meeting in March. Hopes that more central bank stimulus may be around the corner helped recently battered stocks, commodities and currencies rebound. The dollar rose against the euro and snapped back from one-year lows against the yen, though it squandered multi-year highs against counterparts from Britain, Canada and Australia. Before escaping the week with a gain, the Canadian dollar needs to weather local consumer numbers on spending and inflation.

Euro

The euro hovered around multi-week lows, losing buoyancy this week on the ECB’s renewed willingness to double down on stimulus, with risks to area growth and inflation on the rise from global weakness. The euro’s decline so far has come in fits and starts, a sign of markets’ remember December mentality when bank underwhelmed in delivering stimulus. Few this time around will expect the ECB to deliver the moon when it comes to stimulus. Consequently, markets’ more tempered expectations for action should help slow the euro’s descent. Meanwhile, adding to the case for the ECB to do more, initial surveys of area manufacturing and services growth slowed in the latest period.

Sterling

Soothing words of stimulus from the ECB’s Draghi helped spark a turnaround for many of the recently hard hit stocks, commodities and currencies like the UK pound which climbed more than 2c above seven-year lows, and was headed for a weekly win against the dollar. A tentative turn for the better in market morale helped buoy the pound. But flimsy UK fundamentals should limit upside for the pound. The one per cent slide in UK retail sales was larger than expected while the previous number got downwardly revised, news that keeps a local rate hike out of sight.

US dollar

The dollar was on track for a modest win on the week, bolstered by the resurgence in policy divergence between the Federal Reserve and European Central Bank. The former central bank will be in focus next week when it makes its first interest rate call of the year on January 27. For the dollar to get a rise out of the Fed, the bank would have to stick to its recently optimistic outlook for growth and interest rates, and keep a series of rate hikes in play this year. Any material downgrade to its outlook would be dollar negative.