The US dollar took a minor step away from the lowest level in three years against the euro following modest gains on Tuesday amid expectations that monetary stimulus in Europe will be maintained. The greenback also rose against the British pound as it largely ignored a report that revealed weaker manufacturing activity in the New York region.
The European Central Bank is unlikely to have a change of mind any time soon on its promise to keep buying bonds as a part of its monetary stimulus program, according to a new report. The central bankâs Governing Council will hold a meeting in Frankfurt on January 25, during which policymakers may decide that more time is needed to assess the outlook for the economy.
The information contained in the report, which came from three sources that are on or close to the European Central Bankâs Governing Council, goes against hints given by the bank last week. The central bank had signaled that there is a growing desire between its decision makers to change the policy tone in early 2018. One of the main changes that the bank hinted is a reduced commitment to providing monetary stimulus until inflation heads to a targeted level.
Following these signals, traders expected that the European Central Bank may raise interest rates by the end of 2018 for the first time since 2011, which lifted the euro. However, todayâs report pulled the rug from underneath the shared currency as it said a change in the bankâs policy message would not happen any time before March. Policymakers need to see more economic data to have a thorough analysis of Europeâs economic conditions, according to one of the sources.
The pressure on the euro was enough for the US dollar to show little to no sign of response to a drop in manufacturing activity in the New York region. The Federal Reserve Bank of New York said that its Empire State Manufacturing index fell from 19.6 in December to 17.7 in January, despite expectations of a smaller drop to 18.0.
EUR/USD traded at 1.2216 as of 15:30 GMT on Tuesday after touching 1.2199 at 14:05 GMT, the pairâs lowest level since yesterday. EUR/USD began trading today at 1.2268. GBP/USD was at 1.3768 after reaching 1.3744 at 10:45 GMT, which was also the lowest level since yesterday. GBP/USD started the day at 1.3796.
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