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.
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