Sep 08, 2022 02:55AM ET
By: AnalysisWatch
The US dollar fell in early European trading on Thursday and the euro bounced off the lows ahead of the European Central Bank's latest interest rate decision, which is expected to lead to another aggressive hike.
At 02:55 GMT, the dollar index, which tracks the greenback against a basket of six other currencies, was trading 0.2% lower at 109.630, retreating from Wednesday's high of 110.79, a level not seen since June 2002.
The euro makes up more than 50% of the dollar index, and the EUR/USD currency pair traded mostly unchanged at 0.9996, climbing back to parity after hitting a 20-year low of 0.9863 earlier in the week.
The ECB will release its latest policy statement at 8:15 GMT, as it is widely expected to raise rates significantly to combat runaway inflation, even as the risk of a recession in the Eurozone increases.
The debate is over the size of the rate hike, with the consensus pointing towards a 75 basis point increase along the lines of the US Federal Reserve, with the central bank seen as having limited time to try and regain control of record inflation before growth in the region stalls.
Furthermore, "GDP in the first half of this year came in higher than the central bank had expected."
Despite these gains for the euro, however, the dollar remains well supported as the Fed is widely expected to raise interest rates by 75 basis points later this month.
GBP/USD fell 0.2% to 1.1505, heading back towards the previous day's 37-year low of 1.1405, while AUD/USD fell 0.2% to 0.6754 after RBA Governor Philip Lowe hinted at a slower pace of interest rate hikes going forward.
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