* Graphic: the World of exchange rates by 2019 http://tmsnrt.rs/2egbfVh
LONDON, June 4 (Reuters) – The dollar firmed on Thursday, reversing its weakening trend of the past seven days, while the euro slipped ahead of a European Central Bank meeting at which policymakers could increase stimulus measures.
The ECB should increase the size of its 750 billion euro ($840 billion) against the Pandemic Emergency Of the Program is to support the weaker economies of Europe, although some investors think that this will be the case to July’s meeting rather than today.
“For the EUR, the direct implications of the increase in the size of the PEPP are limited, but combined with the development of the recovery fund, and the implicit to the improvement of the responsiveness of the policy has been positive,” said Adam Cole, chief currency strategist, RBC Capital Markets.
But Commerzbank FX-and-EM-business analyst Thu Lan Nguyen said that all the other gains of the euro could be limited by a large amount of positive news is already priced in by the investors.
“The most important question remains and that is whether the crisis will leave a permanent damage and if so, how pronounced this is going to be,” she said.
The euro was at $1.2025, at 0720 GMT, down 0.3%, and a decrease in three-month high. It has been supported recently by the proposals of the eur 750 billion EU-wide recovery fund, consisting of grants and loans, to share the costs of the corona virus on hard-hit countries, such as Italy and Spain.
An argument against the ECB announcing more policy easing on Thursday was the slow progress of the European Union to finalize its recovery to fund the project. The ECB could take in order to maintain pressure on european political leaders.
The central bank delivers its decision at 11: 45 GMT and the ECB President, Christine Lagarde, holds a press conference at 12: 30 GMT.
The dollar rose about 0.3% against a basket of currencies, which had weakened last week, as global markets grew more optimistic about an economic recovery. The U. s. currency has begun to strengthen in overnight trading, but has recovered more dramatically, from about 0600 GMT.
The refuge Japanese yen has fallen to a new two month low, and decreased in the order of 0.1% to 109.06 at 0710 GMT, after having weakened to as much as 109.150 the night before steadying at the start of London trade.
Riskier currencies declined from recent peaks. The Australian dollar dropped as much as 0.5% against the U. s. dollar, reaching a low of $0.6884.
Australian retail sales suffered a historic plunge in April, while the trade surplus has narrowed as the feline corona virus hit the economy, leaving the nation facing its worst contraction in the current quarter.
The Norwegian krone has declined slightly, falling from a recent three-month highs against the dollar and the euro .
The analysts of Goldman Sachs recommended in a note to clients that investors go short on USD/NOK.
“The motto of the sacrifices attractive exposure to a number of cyclical factors that seem likely to turn headwind to tailwind, such as the rise in oil prices and the improved growth in Europe,” they wrote.
($1 = 0.8925 euros) (Reporting by Elizabeth Howcroft; Editing by Toby Chopra)