Greenback steadies versus euro ahead of ECB and US data, Bitcoin in spotlight

THE US dollar held steady against the euro on Tuesday (Mar 5) as investors looked towards the European Central Bank’s rate decision and US jobs data later in the week.

Bitcoin neared a record high as the latest bout of crypto-mania showed no signs of dimming, while China’s yuan was little changed after Beijing laid down an ambitious economic growth target of around 5 per cent for 2024, as widely expected.

Currencies appeared hamstrung in a very busy week of political and economic events, with the euro idling at US$1.085, having earlier tested resistance around US$1.0867.

The US dollar index, which measures the currency against six other majors, edged very slightly higher to 103.89.

“Markets have kind of settled into an equilibrium, especially in the rates space,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets, referring to high levels of correlation in global bond markets, which has reduced the opportunities for currencies to move.

“We’ll need to see the data need to turn either way to really move the market. And of course in the short term there’s quite a lot of ‘event risk’ this week.”

The ECB meets to discuss policy on Thursday but is widely expected to leave interest rates at a record 4 per cent. Investors will be on the lookout for any hints about when rates might start to fall and will scrutinise updated economic projections.

Survey data on Tuesday showed that business activity in the eurozone showed signs of recovery last month.

US employment figures for February have the potential to rock markets on Friday. Economists expect hiring slowed last month but a bigger-than-expected number could add to the US dollar’s 2.5 per cent rise this year so far.

Before that, on Wednesday and Thursday, Federal Reserve chair Jerome Powell will testify to Congress about inflation and the economy.

Bitcoin traded around US$66,900, having surged to US$68,828 in Asian trading hours, just shy of the record peak of US$68,999.99 it touched in November 2021.

The largest cryptocurrency by market value is up around 58 per cent this year, benefiting from flows into exchange-traded funds launched in the US.

Early news out of China’s National People’s Congress contained few surprises, with Beijing sticking with a economic growth target of 5 per cent and a budget deficit of 3 per cent. Analysts at Nomura said the growth target will be challenging to meet without much more stimulus.

Spot yuan opened at 7.1950 per US dollar and was last changing hands at 7.1991, while the offshore yuan was little changed at US$7.2127.

The US dollar was unchanged at 150.42 yen, having again shied away from resistance around 150.85, which has capped the currency for more than three months now.

A break higher would open the way to November’s top at 151.92, but would also run the risk of provoking Japanese intervention.

Powell is likely to reinforce the message that the Fed wants to wait for more data in his Congressional testimony.

“We should expect Fed chair Powell to reiterate patience and emphasise (there is) no hurry to cut rates,” said Christopher Wong, currency strategist at OCBC in Singapore.

“However, these are known knowns and should not affect markets too much unless Powell signals more forceful pushbacks, that could lead to further hawkish re-pricing.”

Sterling eased slightly to US$1.2681 ahead of the British budget on Wednesday. Finance Minister Jeremy Hunt has been trying to dampen speculation about big pre-election tax cuts. REUTERS