Dollar awaits Fed action, ECB to slow bond purchases
Reuters released details of a fresh economic survey concerning the US dollar trend and the European Central Bank (ECB) moves during early Friday.
“The dollar’s direction is in limbo as financial markets await a clearer path from the U.S. Federal Reserve,” said Reuters while citing the indecision of around 60 economists who were split on where they expected the currency to trade over the next three months.
On the other hand, around 42 surveyed said, “The European Central Bank will announce a cut to the pace of its emergency bond purchases from next quarter at its meeting this month but will keep buying bonds through 2024 at least under its main program, and possibly much longer.”
Key quotes
On the back foot even before Fed Chair Jerome Powell’s comments last Friday at Jackson Hole, the greenback has lost almost 1.4% since it hit a nine-month high about two weeks ago. But it is still up around 3% for the year.
While analysts in the Aug. 30-Sept. 2 poll of nearly 60 FX strategists expected the greenback to give up most of those gains over the coming year, they were increasingly uncertain about both the short- and medium-term outlook.
With the eurozone economic recovery broadly improving on the back of widening vaccination campaigns and inflation at a 10-year high, the ECB was expected to announce on Sept. 9 a reduction in monthly purchases from its 1.85 trillion euro Pandemic Emergency Purchase Programme (PEPP) ahead of the Federal Reserve’s own taper decision.
Nearly 60% of economists, or 25 of 42, said the ECB would reduce the pace of its emergency stimulus from next quarter, while 17 said it would maintain its current ‘significantly higher’ pace, while none predicted a further acceleration.
The median of 33 forecasts showed the ECB was expected to buy 70 billion euros worth of bonds under its PEPP from the current 80 billion euros per month target starting next quarter.
Also read: EUR/USD Price Analysis: Prints six-day uptrend to refresh monthly top towards 1.1900
