Dollar Builds on Gains Against European Currencies

Once again, expected policy divergence is taking its toll on European currencies. The US dollar is gaining ground today, with dollar index heading higher and greenback making gains against its high beta counterparts in Europe.

With the latest economic news out of the the United Kingdom and Germany, the US dollar index is gaining ground. The news out of the United Kingdom is lower than expected inflation data. While Germany’s inflation data is in line with expectations, policymakers cut the growth forecast for that country, and that is weighing on the euro.
The news is in contrast with the better information coming out of the United States. Even though economic growth in the United States isn’t particularly strong, when compared to what’s happening in Europe, it appears dynamic. The expected policy divergence, and the continued comparison between what’s happening in Europe and the United States, is likely to lead to continued more gains for the greenback.
At 10:43 GMT the US dollar index is higher, gaining to 85.9110 from the previous close at 85.8220. EUR/USD is down to 1.2644 from the open at 1.2658. GBP/USD has managed to move off its low of 1.5877 and gain to 1.5931, which is higher than the open at 1.5904. USD/JPY is up to 107.2400 from the open at 107.0530.

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