US Dollar Strengthens on Likely Policy Divergence

US dollar is heading higher today, strengthening on likely policy divergence with European currencies. Greenback is gaining support as economic data in other regions sour and as commodities fall back.

The latest news out of the United Kingdom is that deflation is taking hold. With expectations that the Bank of England will have to continue easing policies, the dollar is likely to retain its strength against the sterling.
In the eurozone, the European Central Bank is expected to accelerate its quantitative easing in the hopes that more economic results can be seen. This policy divergence is helping the greenback against the euro.
Commodities are also lower today, with gold and oil falling. Lower commodities are a boost to the US dollar, and the greenback is reacting accordingly. For now, there isn’t much to bring the dollar down, although some feel that the currency is a little overbought right now.
At 10:51 GMT the US dollar index is higher, gaining to 94.8700 from the open at 94.1180. EUR/USD is lower, falling to 1.1208 from the open at 1.1315. This is a far cry from the levels seen recently. GBP/USD is also lower, dropping to 1.5518 from the open at 1.5653. USD/JPY is higher, moving up to 120.0960 from the open at 119.9830.

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