US dollar higher amid talk of more easing from ECB, BOE

[NEW YORK] The dollar pushed higher against the pound and euro on Tuesday, amid more speculation of further easing from the Bank of England and the European Central Bank.

A week after the BOE held off on cutting rates in the wake of the vote to pull out of the European Union, on Tuesday new British finance minister Philip Hammond declared the bank has to respond to the shock.

"The initial response to this kind of shock must be a monetary response by the Bank of England," Chancellor of the Exchequer Hammond told lawmakers at the House of Commons.

"The governor, in announcing that interest rates were not to be lowered last week, did make it clear that the bank is developing a monetary package which it would announce in due course." The pound lost 1.1 per cent against the dollar, falling to US$1.3101.

The euro slipped against the greenback, as expectations for at least a bearish message if not action from the ECB on Thursday.

The ECB is expected to hold fire on monetary policy but prepare the ground for more stimulus measures in September, analysts say.

The euro slipped to US$1.1023, near the low end of its range for the last four months, helped by the surprise fall to a four-year low of Germany's Zew investor confidence index.

Kathy Lien of BK Asset Management pointed out that the US Federal Reserve and the Bank of Canada are the only major central banks not leaning toward more easing.

"The outperformance of the US economy, safety of US assets and steady monetary policy makes American investments attractive and keeps the dollar in demand," she said.

"We continue to look for the dollar to outperform with further losses expected for many major currencies."

AFP