U.S. Dollar Steadies Ahead of ECB Announcement, Draghi Comments

The U.S. dollar steadied against a basket of currencies on Wednesday on below average volume as investors prepared for the European Central Bank’s interest rate decision and monetary policy announcement. Traders will be especially interested in what ECB President Mario Draghi has to say at his post-meeting press conference.

September U.S. Dollar Index futures settled the session at 92.252, up 0.026 or 0.03%.

The Euro hit its highest level against the dollar since 2015 last week as investors bet on a trimming of the ECB’s stimulus program while pushing back their expectations for further rate hikes from the U.S. Federal Reserve.

Investors will be particularly interested in the comments from ECB President Mario Draghi and whether he comments about the exchange rate and if it poses a threat to any policy tightening plans.

The dollar was pressured earlier this week against the Japanese Yen on worries over North Korea’s nuclear weapons testing and by Hurricane Irma, which has grown to be the most powerful hurricane ever produced, and seems destined to strike Florida over the week-end.

A top North Korean diplomat warned earlier in the week that his country was ready to send “more gift packages” to the United States. In the meantime, investors aren’t sure how to play the situation because of the lack of direction from the United States government and other major countries.

Other currencies like the Australian and New Zealand Dollars picked up strength because of increased appetite for risk. The Canadian Dollar rose sharply against the U.S. Dollar after the Bank of Canada raised its benchmark interest rate by a quarter of a point to one percent on Wednesday. It was the second time this year that the BOC had upped the rate, after hiking it for the first time in seven years in July.

 

Gold

Gold prices eased a little from its one-year high on Wednesday as concerns over a potential U.S. government shutdown eased and the dollar recovered late in the session against the Japanese Yen.

President Trump said on Wednesday he had agreed to a three-month increase in the U.S. debt ceiling with congressional leaders. If passed by the Republican-led Congress, it would avert an unprecedented default on U.S. government debt, keep the government funded for the first three months of the fiscal year beginning October 1 and provide aid to victims of Hurricane Harvey.

U.S. Treasury yields rose on the news and gold fell as safe-haven demand among investors worried about a short-term default subsided.

Crude Oil

U.S. West Texas Intermediate crude oil and international-benchmark Brent crude oil continued to attract buyers on Wednesday, supported by rising demand from the United States where Texas Gulf Coast refineries are restarting in the wake of Hurricane Harvey.

U.S. Gulf Coast facilities were slowly recovering from the impact of Hurricane Harvey on key infrastructure in the heart of the U.S. oil and natural gas industry. As of Wednesday, about 3.8 million barrels of daily refining capacity, or about 20 percent, was shut in. U.S. crude prices could continue to be supported as U.S. refineries increase their oil demand as they recover from recent flooding.

Gains could be limited by increased output from OPEC. Its crude exports in August were 25.19 million barrels per day, their lowest since April, according to Thomson Reuters Oil Research. However, average levels for January-August of 25.05 million bpd were above the average 24.85 million bpd in 2016, despite OPEC’s pledge to hold back supplies between January this year and March 2018.

Overall, global oil supplies remain plentiful despite a dip in OPEC’s August exports.