By Peter Nurse
Investing.com – The U.S. dollar has risen in early European trade, as more turmoil in the oil markets resulted in traders taking a less expansive stance with risk, heading back to the safe haven.
At 3 AM ET (0700 GMT), the U.S. Dollar Index, which tracks the greenback against a basket of six other currencies, stood at 100.263, up 0.2%, while EUR/USD fell 0.1% to 1.0815. USD/JPY was largely flat at 107.22.
Oil futures slumped after the largest U.S. oil exchange-traded fund said it would sell all its front-month crude contracts to avoid further losses as prices collapse. The renewed decline in oil prices has overshadowed optimism about the easing of coronavirus-related restrictions seen globally.
From Italy to New Zealand, many governments have announced the easing of restrictions, but British Prime Minister Boris Johnson said Monday that it was too early to relax them there, hitting sterling.
Speaking outside the prime minister’s house at No. 10, Downing Street for the first time since recovering from the virus, Johnson said “we are now beginning to turn the tide” on the disease, but the lockdown would not be relaxed too soon.
At 3 AM, GBP/USD traded at 1.2416, down 0.1%.
Another country worth keeping an eye on Tuesday is Sweden, with the Riksbank set to announce its latest interest rate decision at 4:30 AM ET (0830 GMT), and is generally expected to hold still at 0% – a view that has led the krona to strengthen against the euro in recent weeks.
Danske Bank disagreed with this view, predicting the Swedish central bank will head back into negative rates territory, cutting its repo rate by 25 basis points to minus 0.25%.
“Recent labour market and NIER confidence data showed that the Riksbank’s February forecasts are obsolete – the world has changed drastically into one of recession and deflation,” said analysts at Danske Bank, in a research note.
“We have been surprised by the Riksbank’s reluctance so far to signal a repo rate cut back into negative as it has pledged to do ‘whatever it takes’. Now, all board members have said that zero is not a floor. Four out of six appear to be prepared to cut, making it likely that the other two will bend,” the bank added.
EUR/SEK traded at 10.8388, up 0.1%, bouncing off a six-week low.
Forex – Dollar Pushes Higher; Riksbank in Play
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