The Dollar is strengthened because of the tensions in China ; Euro awaits ECB

By Peter Nurse

The dollar gained a few buyers at the start of european trade on Thursday, as tensions between China and the United States have included them in the night, but the gains against the euro were limited before the meeting of the european central Bank.

Has 09.35 am, the ndice of the u.s. dollar, which tracks the greenback against a basket of six other currencies, was $ 97,502, up 0.3%. However, the index is still down about 5% compared to its peak in march, when the pandemic of sars coronavirus had caused a sprint toward the shelter.

Elsewhere, USD/JPY has risen 0.1% to 109,03, GBP/USD declined by 0.3% to 1,2533 and EUR/USD fell 0.2% to 1,1210.

The u.s. administration has suspended the flights of chinese airlines in his country from the 16th of June, in exchange for which China had banned u.s. carriers from entering its airspace.

The relations between the two countries deteriorated after the approval by China of the enactment of laws on national security to Hong Kong and Macao last month.

Nevertheless, EUR/USD remains above the level of 1.12 as it crossed Wednesday for the first time since mid-march.

The currency has been sustained by the hope of measures of budgetary support to the scale of the european Union, after Germany had, last month, weighed all its weight in favour of the idea of a fund to relaunch the european Union, breaking with its long-standing tradition of resisting attempts at fiscal integration in the currency block.

This has prompted the european Commission to propose a stimulus funds to 750 billion euros, the money being divided into 500 billion euros given to EU countries in the form of grants and the 250 billion euros remaining being available in the form of loans.

Prior to this, the european central Bank had already undertaken a large part of the bulk of the work necessary to support the weaker economies of the region, and it should still offer most of the largesse in the course of the day on Thursday.

“I suspect that the market has already anticipated an increase in the PEPP approximately $ 500 billion, and that in the short term, there is a risk of a correction,” said Masafumi Yamamoto, a strategist in chief for foreign exchange at Mizuho Securities.

“The market could react positively if the ECB broadens the aim of its purchase of the bonds or removes its limit on every country. But in terms of total size, it is difficult to expect a positive surprise now,” he said.

The ECB makes its policy decision at 13: 45 and the president of the ECB, Christine Lagarde, holds a press conference at 14: 30.

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