Investors were cautious yesterday ahead of an ECB rate decision, but the euro has rebounded this morning

The euro relinquished some of its recent gains against the greenback yesterday, with investors on the defensive ahead of the ECB rate decision today.

  • A broadly stronger dollar was the currency of choice yesterday as investors trimmed “riskier” positions in favour of the haven currency as equities slipped into the red, easing risk appetite.
  • The dollar also benefited after a US official said raising interest rates would not derail the US economic recovery. “Even if we were to start immediately, much time would pass before incremental increases could be considered tight or even neutral policy.
  • Additionally analysts noted that the greenback was being supported by speculation that the dollar’s decline may have been too fast to sustain.
  • In trading this morning, the greenback has come under pressure after Australian employment data reinforced demand for higher-yielding assets.
  • The ECB are widely expected to announce today at 12:45BST that interest rates in the eurozone will remain at a record low of 1.0%, though the tone of the accompanying statement is likely to reflect growing optimism over the state of economic recovery in the region.