Dollar near US75c as ECB eyed

Investors are awaiting the results of the European Central Bank’s policy meeting tonight.

The Australian dollar was little changed late on Thursday, with investors focussed squarely on a meeting of the European Central Bank overnight.

At 5.45pm (AEST), the Australian dollar was trading at US74.96 cents, up from US74.79c late on Wednesday.

ECB President Mario Draghi has already identified the UK referendum vote last month as a key risk that could shave up to 0.5 percentage points off eurozone economic growth over three years.

But the eurozone’s central bank is expected to leave its €1.8 trillion ($US1.98 trillion) stimulus unchanged at its policy meeting as it assesses the likely scale of the damage.

The ECB’s economists are due to provide new forecasts for economic growth and inflation at the time of the ECB’s September meeting, when more evidence will be available on the immediate impact of the vote.

Sue Trinh, currency strategist at RBC Capital Markets based in Hong Kong, said the ECB will want to ensure that it is in a position to maintain its quantitative easing program.

Locally, there is little to be done ahead of second quarter inflation data on Wednesday.

The Reserve Bank of Australia made it clear on Tuesday that the consumer price index will determine if there is a need to lower interest rates next month.

In the minutes released on Tuesday of its July 5 board meeting, when official interest rates were left unchanged at a record low of 1.75 per cent, the RBA said it will review its economic forecasts in August, and this would also help to determine if a change in interest rates was required.

Earlier on Thursday, a survey of Australian business conditions in the second quarter showed some improvement despite the headwinds of Brexit and concerns around China.

Australia’s non-mining recovery remains on track, according to NAB’s second quarter business survey, said Alan Oster, chief economist at NAB.

Firms are continuing to suggest strong investment plans for the next 12 months, while near-term employment intentions are improving, it added.

NAB’s business confidence index (a net balance of respondents to the survey) fell to +2 in the second quarter from +4 in the first quarter, but the business conditions index rose to +11 from +10 over the same period.