The world markets rally halted amid ECB stimulus expectations which had supported investor confidence in a global financial recovery from the coronavirus pandemic.
Governments around the world have gradually started to lift tough lockdown measures imposed to contain the spread of COVID-19.
More stimulus expectations have widened the gap between financial markets and the real economy. Besides, investors expect a slow economic recovery despite growing concern over U.S.-China tensions, U.S. civil unrest and rising coronavirus infections.
ECB policymakers will probably increase debt purchases to support the bloc’s weakest economies. There is also a strong possibility to increase the size of its 750 billion euro ($840 billion) Pandemic Emergency Purchase Programme. However, some investors think this will happen at July’s meeting rather than today.
The latest policy actions regarding the ECB stimulus have resulted in a seven-day winning streak for the euro against the U.S. dollar. Further gains for the euro could be limited as investors have already priced a large amount of positive economic news.
Interest rates will probably remain unchanged as the ECB’s minus 0.5% deposit rate is already at a record low.
The ECB delivers its policy decision at 1145 GMT. ECB President Christine Lagarde holds a news conference at 1230 GMT.
Markets await Friday’s U.S. Labor Department May jobs report. Experts expect nonfarm payrolls to show the unemployment rate soaring to a post-World War Two high of nearly 20%.
Financial market moves show how starved investors are for any evidence of a turnaround.
START TRADINGForex – ECB stimulus expectations pause rally
There is a long-term negative for the dollar in the currency markets. But even in the short term, the prospects do not look good. Riskier currencies retreated from recent highs.
The dollar strengthened on Thursday, snapping out of week-long run of falls. The greenback rose around 0.3% against a basket of currencies.
The safe-haven Japanese yen fell to new two-month lows and was down around 0.1% at 109.06.
The Australian dollar fell as much as 0.5% against the U.S. dollar, hitting a low of $0.6884.
The euro slipped ahead of a European Central Bank meeting at which policymakers could step up stimulus measures. The common currency was at $1.1202 at 0720 GMT, down 0.3% and retreating from three-month highs. It has been supported recently by proposals for a 750-billion-euro EU-wide recovery fund.
The pound fell on Thursday as Britain and the European Union (EU) continued their Brexit negotiations, before the late June deadline. By then the United Kingdom needs to say whether it wants an extension of the transition period.
Concerns that Britain will exit the EU without a trade deal at the end of the year weighed on the British currency. The sterling was last trading 0.5% down at just above $1.25. Against the euro, sterling slipped 0.1% to 89.50 pence.
Oil prices fell, reversing gains made the previous session, due to uncertainty about supply cuts by major producers.
U.S. crude fell 2% to $36.53 a barrel. Brent crude fell 1.4% to $39.23 per barrel, having touched highs above $40 a barrel for the first time since early March.
Spot gold rose 0.25% to $1,701.28 an ounce early on Thursday after losing 1.6% on Wednesday.
PLEASE NOTE The information above is not investment advice.
Sources: Reuters, Investing, CNN money