Dollar rally stalls as euro climbs ahead of EU summit


The dollar traded mixed against other major currencies on Thursday, falling particularly hard against the euro as traders watched a key EU summit in Brussels that could shape the future of the eurozone.

The ICE U.S. Dollar Index
DXY, -0.10%
was down 0.01% at 95.259, stalling after a rally on Wednesday when the White House walked from harsh measures to curb Chinese investment in the U.S.

The euro
EURUSD, +0.2856%
was one of the best performing currencies on Thursday, bouncing off an almost one-month low reached on Wednesday. The shared currency bought $1.1591, up $1.1554 late Wednesday in New York.


Euro traders were waiting for the outcome of the two-day EU summit kicking off on Thursday, where leaders of the European Union are expected to discuss the regions ongoing migration crisis. German Chancellor Angela Merkels already fragile coalition government is at risk of failing if she doesnt come home with a solution to tackle immigration. Her coalition partner and sister party, the Christian Social Union, is pushing Merkel to impose tougher immigration rules, raising fears the dispute could lead to a collapse of the government and early elections.

Although no compromise on the [immigration] deal has been reached, the immediate threat of early elections has receded, but this Fridays EU summit could produce some market moving headlines as the migrant issue remains front and center of EU policy, said Boris Schlossberg, managing director of FX Strategy at BK Asset Management, in a note.


Brexit was also expected to be discussed at the EU summit, but with the U.K. still unclear about its desired post-divorce relations with the EU, little progress is expected at the meeting.

The pound
GBPUSD, -0.2135%
fell to $1.3097 from $1.3115 on Wednesday on what analysts described as pessimism going into the Brussels gathering.

As for Brexit, the EUs view is that theres not much new to discuss, that Britain still hasnt put forward a viable position for the two sides relationship after Brexit. There probably wont be much disagreement within the EU side about the issue, but the conclusion is likely to be negative for Britain and the pound, in my view, said Marshall Gittler, chief strategist at ACLS Global, in a note.

In other currencies, the yen was slightly higher against the dollar, with the buck buying 楼110.21 compared with 楼110.26 on Wednesday.

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