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Draghi Downs Euro as Dollar Moves Sharply Higher

3/9/2018, 11:05:54 AMBasics of Trading
Draghi Downs Euro as Dollar Moves Sharply Higher

The dollar rose against a basket of major currencies despite the prospect of global trade war as President Trump is expected to follow through with plans to impose tariffs on steel and aluminium imports.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, rose 0.63% to 90.12

"I'm sticking with 10 and 25 (percent) initially. I'll have a right to go up or down, depending on the country, and I'll have a right to drop out countries or add countries," Trump told reporters at the beginning of a Cabinet meeting at the White House.

Trump is expected to confirm the trade tariffs later Thursday. Faced with the prospect of a global trade war, investors, however, continued to pile into the dollar amid a sharp fall in both sterling and euro.

EUR/USD fell 0.76% to $1.2316 after the European Central Bank (ECB), as expected, left interest rates unchanged but adopted a less hawkish stance in monetary policy statement, dropping its pledge to increase bond purchases if the economic outlook deteriorates.

ECB president Mario Draghi, however, cited potential headwinds for the EU economy in the form of subdued inflation, and a potential trade war with the U.S.

CIBC said that it expects the EUR/USD to rise only modestly from current levels by the end of 2018, before moving back into the low $1.30's in 2019, when the ECB is expected to join other developed economies in raising interest rates.

GBP/USD fell 0.63% to £1.3813. While USD/CAD rose 0.33% to C$1.2955 after the oil-price sensitive loonie came under pressure as oil prices retreated for the second straight day.

USD/JPY rose 0.07% to Y106.16 ahead of the Bank of Japan’s monetary policy announcement Th