Euro's bounce slows as focus shifts back to economy, ECB policy


© Reuters. Wads of euro banknotes are stacked in a pile at the Money Service Austria company’s headquarters in Vienna

By Shinichi Saoshiro

TOKYO (Reuters) – The dollar held steady against its peers on Tuesday, lacking strong direction as U.S. markets were shut for a holiday the previous day, while the euro’s latest bounce slowed as the focus drifted back to the economy and European Central Bank policy.

The versus a basket of six major currencies was little changed at 96.784 after ending the previous session flat. The U.S. financial markets were closed on Monday for Presidents’ Day.

The euro was little changed at $1.1312 after edging up 0.16 percent overnight, when it pulled away from a three-month low of $1.1234.

The single currency was buoyed by improved investor sentiment as expectations increased for an easing of the U.S.-China trade conflict after both sides reported progress in talks.

The dollar, the world’s most liquid currency, has tended to perform well during bouts of investor nervousness.

“The euro’s latest bounce was not based a positive incentive specific to the currency and the market will likely return to pricing in the potential negatives. The euro will remain on a shaky footing,” said Masafumi Yamamoto, chief forex strategist at Mizuho Securities.

“There is still some way to go before potential negatives are factored into the euro ahead of the March 7 ECB meeting.”

ECB policymakers will next meet on March 7, when the bank’s staff are expected to slash growth and inflation projections as the euro zone suffers its biggest slowdown in half a decade.

The dollar was a shade lower at 110.59 yen after gaining a modest 0.15 percent overnight.

The Australian dollar was flat at $0.7129 after dipping 0.15 percent the previous day.

The immediate focus was on the minutes from the Reserve Bank of Australia’s (RBA) monetary policy meeting held at the start of the month.

Governor Philip Lowe on Feb. 6 opened the door to a possible rate cut by acknowledging growing economic risks, in a remarkable shift from its long-standing tightening bias that sent the tumbling.

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