Euro rebounds as focus shifts to ECB policy announcements

The greenback weakened against its major rivals on Wednesday amid improving market mood and falling US Treasury bond yields. After snapping a nine-day winning streak, the US Dollar Index continues to edge lower early Thursday. The shared currency holds its ground ahead of the highly-anticipated policy announcements of the European Central Bank (ECB). Later in the day, the US economic docket will feature the Retail Sales report for March and the weekly Initial Jobless Claims data.

The data from the US showed on Wednesday that the annual producer inflation climbed to 11.2% in March from 10.3% in February. Although this print came in higher than the market expectation of 10.6%, Wall Street’s main indexes registered strong daily gains and the benchmark 10-year US T-bond yield closed in the red for the second straight day.

Meanwhile, US stock index futures indexes are up between 0.2% and 0.4%, suggesting that the market environment is likely to remain risk-positive. It’s worth noting, however, that a relief rally might be hard to come by amid the coronavirus-related lockdowns in China and the ongoing conflict between Russia and Ukraine.

USD/CAD lost nearly 100 pips on Wednesday and closed below 1.2600. The pair trades in negative territory at around 1.2550 in the European morning. The Bank of Canada (BOC) hiked its policy rate by 50 basis points to 1%. In the press conference, Bank of Canada Governor Tiff Macklem said that the bank is prepared to move as forcefully as needed to tackle inflation.

EUR/USD managed to build on Wednesday’s rebound and was last seen posting modest daily gains above 1.0900.

GBP/USD took advantage of the selling pressure surrounding the greenback and extended its recovery above 1.3100.

USD/JPY surged to its highest level in nearly two decades above 126.00 on Wednesday but erased the majority of its daily gains amid retreating US T-bond yields. The pair stays relatively quiet near mid-125.00s early Thursday.

Gold capitalized on falling US yields and reached a monthly top above $1,980 before going into a consolidation phase near $1,970 early Thursday.

Bitcoin edged higher on the back of risk flows on Wednesday. BTC/USD clings to small daily gains above $41,000 on Thursday. Ethereum gained 3% on Wednesday and started to fluctuate in a tight range at around $3,100.

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