Forex - Greenback slips on ECB high hopes, Fed easing speculation

Investing.com - The U.S. dollar traded lower against its rivals Monday, however safety flight demand remained in force as traders express skepticism over the European Central Bank’s debt control arrangement.

During U.S. morning trade, the dollar turned slightly lower against the euro, with EUR/USD easing up 0.18% to 1.2410.

However, sentiment on the euro remained fragile after the ECB indicated last week that it may restart its bond buying program, to help lower Spanish and Italian borrowing costs.

Investors remained wary amid concerns over how effective the ECB’s new bond buying program would be, in the light of differences from the bank’s existing scheme.

ECB leader Mario Draghi also said any such action was conditional on euro zone governments experiencing difficulty on bond markets applying to the bloc’s bailout funds to purchase government bonds and accepting strict conditions and supervision.

Renewed concerns that Spain may yet request a full-scale sovereign bailout kept the yield on the country’s 10-year bonds hovering close to the critical 7% threshold widely seen as unsustainable if a country is to remain solvent.

Meanwhile, data on Friday showing an unexpected increase in the U.S. unemployment rate last month fuelled expectations for another round of quantitative easing from the Federal Reserve.

The greenback was higher against the pound, with GBP/USD down 0.15% to hit 1.5619.

The pound came under pressure amid concerns that the Bank of England will cut its forecast for growth in Wednesday’s quarterly inflation report, increasing the likelihood for further stimulus measures from the central bank.

Earlier Monday, a report by mortgage lender Halifax showed that U.K. house prices fell by 0.6% in July, slightly more than expectations for a 0.5% decline, indicating that the pattern of broadly stable house prices is remaining unchanged.

Elsewhere, the greenback was down against the yen and the Swiss franc, with USD/JPY falling 0.37% to trade at 78.18 and USD/CHF down 0.23% to 0.9679.

The greenback was broadly lower against its Canadian, Australian and New Zealand counterparts, with USD/CAD down 0.15% to 0.9996,AUD/USD inching up 0.08% to 1.0575 and NZD/USD adding 0.30% to trade at 0.8212.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.22% to 82.23.

Also Monday, the ECB said that it refrained from buying government bonds through its Securities Markets Program last week.