Forex Dollar Holds Firm Against Euro as Investors Anticipate ECB and US Economic Data, Bitcoin Reaches Near-Record High

On Tuesday, the US dollar maintained its position against the euro as investors turned their attention to upcoming events such as the European Central Bank's rate decision and the release of US employment figures later in the week.

Meanwhile, Bitcoin surged close to its all-time high, signaling sustained enthusiasm in the cryptocurrency market. China's yuan remained relatively stable following Beijing's announcement of an ambitious economic growth target of approximately 5% for 2024, in line with market expectations.

In a week filled with significant political and economic developments, currency markets found themselves in a state of relative stasis. The euro hovered around the $1.085 mark, with earlier attempts to breach resistance levels around $1.0867 proving unsuccessful.

The dollar index, which gauges the greenback against a basket of six major currencies, saw a marginal uptick to 103.89.

Alvin Tan, the head of Asia FX strategy at RBC Capital Markets, noted the current equilibrium in markets, particularly in the rates space. This equilibrium, driven by high correlations in global bond markets, has limited currency movements, requiring significant data releases to prompt market shifts. The week ahead is laden with event risks, including the ECB's policy meeting and Fed Chair Jerome Powell's testimony to Congress.

The ECB is expected to maintain its record-low interest rates during its meeting on Thursday, with investors keenly observing any signals regarding future rate adjustments and updated economic forecasts.

Survey data released on Tuesday indicated signs of recovery in business activity across the eurozone last month.

Friday's release of US employment figures for February carries significant weight, with economists forecasting a potential slowdown in hiring. A deviation from these expectations could further bolster the dollar's performance, which has already seen a 2.5% increase since the beginning of the year.

Powell's testimony on Wednesday and Thursday is anticipated to provide insights into the Fed's stance on inflation and the broader economy.

Meanwhile, Bitcoin continued its upward trajectory, nearing $66,900 and approaching its previous record peak of $68,999.99 set in November 2021. The cryptocurrency has seen a remarkable 58% surge in value since the beginning of the year, buoyed by inflows into US-launched exchange-traded funds.

China's National People's Congress revealed few surprises in its early announcements, reaffirming the country's growth target and budget deficit. However, analysts at Nomura expressed skepticism regarding China's growth target, suggesting that meeting it would require substantial stimulus measures.

The yuan maintained its stability, with the spot yuan opening at 7.1950 per dollar and the offshore yuan holding steady at $7.2127.

In currency markets, the dollar-yen pair remained unchanged at 150.42 yen, as it continued to shy away from resistance levels at 150.85. A breakthrough above this level could pave the way for further gains but may also prompt intervention from Japanese authorities.

Powell is expected to reiterate the Fed's patient approach in his congressional testimony, emphasizing the need for additional data before considering policy adjustments.

Christopher Wong, a currency strategist at OCBC in Singapore, anticipates Powell's message to have limited impact on the markets unless he signals a more aggressive stance against inflation.

In the midst of these developments, the British pound softened slightly to $1.2681 ahead of the UK's budget announcement by Finance Minister Jeremy Hunt on Wednesday. Hunt has been working to temper speculation surrounding potential tax cuts ahead of the upcoming elections.

Also Read: Forex Dollar Holds Firm Amid Inflation Fears, Yen at Crucial Point