Forex Today: Dollar eases as eyes shifts to ECB’s decision

What you need to take care of on Thursday, September 8:

The American dollar maintained its strong footing throughout the first half of the day but gave up during the American session.

The EUR/USD pair flirted with the December 2002 low at 0.9859 before recovering, now battling to regain parity. Nevertheless, the European energy crisis will likely limit shared currency demand. Skyrocketing prices in the EU are taking their toll on households and businesses and pushing high inflation up. European non-ferrous metal producers have called for emergency EU action to prevent permanent deindustrialization in a letter to the European Commission President, Ursula Von der Leyen. Producers noted that "50% of the EU's aluminium and zinc capacity has already been forced offline due to the power crisis."

Russian President Vladimir Putin rushed to answer by announcing Moscow is working on the construction of new pipelines to transport gas, some of which pass through Mongolia to China. He also noted that the G7 oil price cap "would be an absolutely stupid decision," adding they would not supply "anything" if it's contrary to Russian economic interest. "No gas, no oil, no coal, no fuel oil, nothing."

The European Central Bank will announce its monetary policy decision on Thursday. The ECB is widely anticipated to hike rates by 50 bps when it meets on Thursday, but the focus will be on whether European policymakers are willing to put growth behind taming inflation or not.

The US published the Beige Book, a survey of economic conditions based on data from 12 district banks. The document showed that price growth has slowed in 9 of the 12 districts, although most surveyed believe price pressures will last at least until the end of the year.

The Bank of Canada hiked its main rate by 75 basis points to 3.25%, in line with market expectations. The accompanying statement showed that policymakers would likely continue to raise the benchmark given the inflation outlook. On a positive note, the document also revealed that they believe the economy continues to operate in excess demand and labor markets remain tight. USD/CAD trades around 1.3140.

Bank of England Monetary Policy Report Hearings put pressure on the pound at the beginning of the day, with GBP/USD plummeting to 1.1404. Policymakers are still on the tightening path, and Governor Andrew Bailey noted that the central bank would continue to respond to price shock. Broad dollar's weakness helped the pair to recover to the current 1.1510 price zone.

The USD/JPY pair kept marching higher and reached 144.98, to end the day around the 144.00 figure.

The AUD/USD pair trades around 0.6750 by the end of the day, trimming early losses. Encouraging Australian data did little for the pair, rising amid the better tone of Wall Street and easing government bond yields weighing on the American currency.

Spot gold fell to an intraday low of $1,691.32 a troy ounce but managed to recover towards the current $1,716 level.

Crude oil prices, on the other hand, edged sharply lower amid speculation about easing Chinese demand following tepid local data. China's trade surplus was $79.39 billion in August, well below the $101.26 billion from July.

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