The U.S. Dollar Index continued to firm against a basket of major rivals, holding on to gains made on Wednesday in the wake of last Friday’s labor report; the Index is used by FX traders to measure the greenback’s strength relative to its peers. Individually, the greenback steadied against the common currency Euro after profit taking short covering following a pull back which occurred after the European Central Bank announced a number of stimulus measures which weakened the Euro. Hawkish comments made by one Federal Reserve Bank president also helped to underpin the U.S. Dollar; James Bullard said that the economic outlook combined with the drop in the unemployment rate could persuade him to reconsider the timing on an interest rate rise.
As reported at 11:25 a.m. (JST) in Tokyo, the U.S. Dollar Index traded at 80.634 .DXY, moving away from last Friday’s 2-week low at 80.240 .DXY. The EUR/USD steadied at $1.3590, after losing nearly 0.4% yesterday; last week the pair hit a 4-month trough at $1.3503 in the moments after the ECB announcement.
Interest Rate Differentials to Weigh on Euro
One currency strategist believes that the Eurozone’s interest rate differentials on government debt, relative to both the United States and the United Kingdom, could put additional pressure on the Euro against both the U.S. Dollar and the Pound Sterling.