The greenback could capitalize on euro weakness if the CB delivers a dovish tone
After a sharp sell-off in the global financial markets seen on Wednesday, stocks have stabilized today but investors continue to keep a cautious stance, helping the dollar to stay afloat following the recent jump versus most counterparts.
The massive plunge in stock markets was due to coronavirus-related concerns as rising cases stoke worries about the already fragile economic recovery and sent safe-haven currencies higher. As a result, USDJPY plunged to lows marginally above the 104.00 handle while EURUSD briefly dipped below the 1.1720 and struggles to stage a bullish correction on Thursday, suggesting the pair could threaten the 1.17 handle if the pressure persists in the short term.
Later in the day, the greenback could capitalize on euro weakness if the CB delivers a dovish tone during the upcoming meeting. While the central bank is not expected to bring any changes to the current monetary policy stance, the officials could hint at additional stimulus measures in December. If so, EURUSD may drift lower and get below 1.17 for the first time in nearly two weeks.
Elsewhere, the Australian and Canadian dollars plunged dramatically on Wednesday amid the additional pressure from the oil market as Brent crude dipped below the $40 handle after the EIA report showed that US crude oil production jumped by 1.2 million barrels per day. As a result, AUDUSD fell to more than one-week lows around 0.7040 while USDCAD rallied to the 100-DMA and exceeded the 1.33handle for the first time since October 7.
After a modest retreat in Asia, the USD index turned positive during the European hours. In the short term, the currency could be affected by US weekly jobless claims data, the GDP report, and pending home sales data. Stronger-than-expected figures may pave the way for a local rebound in risk-on sentiment, which would be USD-negative.