The Euro has its first rise in two-and-a-half weeks against the US dollar yesterday after the ECB president said, in his presentation to the EU Parliament Committee for Economic and Monetary Affairs in Brussels, that the central bank needed more time to assess the factors that will determine whether or not it will expand its stimulus program.
This came as a surprise to the markets, as it had been almost taken for granted that QE in the Eurozone would be increased. This is what has been priced into the EURUSD exchange rate over the past three weeks or so.
The usual suspects were cited as bearing on the situation – perceived weakness in emerging markets, for which read China, falling commodity prices and recent turbulence in financial markets. The Eurozone monetary policy makers do not know the extent to which these things will be of a temporary or permanent nature. Reading between the lines, it would appear that the ECB is now giving some attention to the dangers inherent in measures that would be successful in increasing inflation, but to a level that would be hard to control when rising.
Heavy reporting day in US
Later today we will have three reports from the US that have the potential to move the market. These are Durable Goods, Initial Jobless Claims and New Home Sales. Durable Goods in particular has been known to rock the exchange rate of those currency pairs that have the greenback as a component.
Initial Jobless Claims provide a weekly early indication of what might be expected from the all-important Non-Farm Payrolls report that comes out on the first Friday of every month. The New Home Sales report is a measure of the overall strength of the economy but, as in all countries, it cannot be relied upon to be uniform in nature, as a different housing market effectively exists in each city and geographical location.