Euro close to $ 1.12 as investors wait for central bank meetings

LONDON (Reuters) – FX markets began the week, waiting to see how fast and how fast policymakers could soften the policy, starting Thursday with the European Central Bank.

The euro weakened to $ 1.12 in Asian trade, as the dollar gained on the demand for safe havens in the face of rising tensions in the Middle East.

The positioning data released last week showed that investors remain net of dollar dollars, unchanged from the previous week.

Exchange rates have been stuck in the markets in recent weeks, with the Federal Reserve and the ECB providing for easing, more or less canceling out the impact on the euro and the dollar.

Prices for a 50 basis point cut from the Fed soared last week after the accommodating speech by Fed President John Williams in New York. These expectations then declined after a spokesman for the Fed said his remarks did not refer to "potential political actions."

The price forecast for a 50 basis point cut went from 71% last week to 18.5% Monday.

The Fed is holding its monetary policy meeting next week, along with the Bank of Japan.

"Foreign exchange markets are not overly enthusiastic about monetary policy when everything is nuanced and forward-looking, but when central banks actually change rates and adjust QE, monetary policy becomes the guiding thread," said the strategist. BMO Capital Markets, Stephen Gallo. .

The euro fell slightly to 1.1217 dollar after reaching more than 1.1208 dollar in Asian trading. The dollar index rose 0.1% to 97,199.

Analysts said the dollar was benefiting from a confrontation in the Strait of Hormuz, the most important waterway in the oil trade. Images showed the Iranian army defying a British warship during the seizure of an oil tanker on Friday.

The dollar rose 0.2% against the yen, to 107.91, after having exceeded the level of 108.

The Swiss franc has fallen back after hitting a new high in two years against the euro. At 7:30 GMT, it had lost 0.1% to 1.1023 after reaching 1.1013 francs for one euro.

The pound fell below $ 1.25, losing 0.2% to $ 1.2483 as investors waited to see if Boris Johnson would win the Conservative leadership race, as expected.

"We are likely to take the lead over these big risks later in the week," said Rodrigo Catril, currency strategist at National Australia Bank. "The market is still boring its wounds after going back to Fed Williams."