The US dollar continued to ease in the Asian session on Wednesday morning to trade at 95.90 after trading above the 97 price just 24 hours ago. The greenback lost its appeal as traders responded to the euro rally as rumors surfaced that the Eurozone and Greece were about to reach terms on a bailout to avoid default and a Greek exit.
The euro soared from 1.0920 to trade at 1.1158 adding almost 200 points on Tuesday after consumer prices soared well above expectations supporting Mario Draghi’s plans for the ECB to jump start the Eurozone economy. Eurozone consumer prices rose for the first time in six months during May, a significant victory for the European Central Bank in its campaign to avert a slide into deflation that could have derailed the currency area’s fragile economic recovery.
Still, analysts said that the improvement in inflation—which is still far below the ECB’s target—won’t be sufficient to alter the bank’s plans to pump over €1 trillion ($1.09 trillion) into the Eurozone economy in €60 billion monthly increments until at least September 2016.
The 0.3% rise in prices for the year earlier wasn’t solely due to a rebound in energy costs, and there was some evidence that strengthening consumer demand is raising the prices of other goods and services. That will encourage the ECB in its struggle to meet its inflation target of just below 2%.
Traders are keeping their attention on the ECB meeting and press conference later today. Mario Draghi’s press conference will be exciting as always. After a long, steady decline in the inflation rate, consumer prices first fell below their levels of a year earlier in December. The next month, the ECB announced the launch of a program of quantitative easing, under which it would buy more than €1 trillion of mostly government bonds. It launched the program in March.
Members of the ECB’s governing council will likely feel some relief when they gather for their fourth policy meeting of the year. Immediately after Mr. Draghi’s conference traders will turn their attention to the ADP payroll report ahead of Friday’s Nonfarm payroll and unemployment report.
In the Asian session this morning the Australian dollar climbed after GDP printed better than expected following Tuesday’s climb in the current account. The Aussie is trading at 0.7793 up by 21 points. The Australian dollar has surged in offshore trade as investors continued to assess the Reserve Bank of Australia’s monthly rate call and Greece’s creditors worked toward an amenable deal to extend a bailout to the debt-stricken nation. The Australian dollar has spiked above 78 US cents following better-than-expected GDP data showing the Australian economy grew by 0.9 per cent in the March quarter. The kiwi dipped 6 points after reports showed a drop in commodity prices. The NZD fell to 0.7176.
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