Euro recovers somewhat from ECB-spurred slide
The dollar declined on Monday, pulling back after scoring its best week of the year on Friday, as traders welcomed the brighter outlook for U.S. tax reforms and solid data.
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What are currencies doing?
The ICE Dollar Index dropped 0.3% to 94.635, easing back from the three-month high it jumped to last week (http://www.marketwatch.com/story/dollar-index-jumps-to-3-month-high-as-ecb-fueled-euro-slump-continues-2017-10-27).
The euro rose to $1.1634 from $1.1610 late Friday in New York. The shared currency tumbled last week to a more-than three-month low against the dollar after the European Central Bank said it will extend its quantitative easing program (http://www.marketwatch.com/story/draghi-averts-taper-tantrumfor-nowas-ecb-begins-slow-walk-to-normalization-2017-10-26) another nine months from January, albeit at a slower rate. The move was seen as a "dovish taper" and confirmed speculation eurozone interest rates are unlikely to go up before 2019.
Read:Is the euro rally toast after ECB unveils dovish bond-buying cutback? (http://www.marketwatch.com/story/is-the-euro-rally-toast-after-ecb-unveils-dovish-bond-buying-reduction-2017-10-26)
The pound also rebounded on Monday, fetching $1.3163, up from $1.3127 on Friday, ahead of the closely watched Bank of England meeting on Thursday. The U.K. central bank is widely expected to raise interest rates for the first time in more than a decade.
The Japanese yen gained, with the buck buying Yen113.54, compared with Yen113.67 on Friday.
What's driving the markets?
The solid gain for the dollar last week came after better-than-expected U.S. economic growth data and signs the Donald Trump administration is getting closer to winning support for a wide-ranging package of tax cuts.
The Republicans are expected to reveal their tax bill on Wednesday, but could face major challenges in pushing the reforms through. The powerful corporate interest group the National Association of Home Builders over the weekend came out against the proposal and is preparing a nationwide campaign against the bill.
Traders were also looking ahead to Trump's expected announcement of the next Federal Reserve chair, which could come later this week. Current Fed governor Jerome Powell is seen as most likely to become the new central bank boss rather than the more hawkish John Taylor. The Fed also announces its latest policy decision on Wednesday, but is widely expected to keep rates on hold.
What are strategists saying?
"The developments on the political front will remain the catalyst behind the price action over the next few days. The greenback has been at the forefront with encouraging progress on all the important issues traders are keeping an eye on such as tax reforms and the name of a new Fed Chief is also pointing towards a bullish 2018 for the dollar," said Konstantinos Anthis, researcher at ADS Securities, in a note.
(END) Dow Jones Newswires
October 30, 2017 06:36 ET (10:36 GMT)