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With the USD-index giving back some of yesterday’s gains, the major USD pairs prompted a tick higher. EURUSD reclaimed the 1.2500 handle overnight during broad based USD weakness. The pair shrugged off the US trade balance, with EURUSD remaining in close proximity to the 1.2500 handle as the USD remained unfazed. Looking ahead the ECB rate decision later in the week will be in focus, however today the host of Fed speakers including Kocherlakota (Voter, Dove) and Lacker (Non-Voter, Hawk) will draw attention.
I get today`s update:
EUR/USD - 1.2553.. Ahead of Thurday's ECB policy meeting, WSJ reported the ultra low inflation becoming entrenched in Europe is playing out in strikingly different ways across the euro zone's 18 economies, complicating attempts to combat it.
In crisis-hit countries such as Greece n Spain, the detrimental effects of falling prices, known as deflation, are showing up clearly in strained profits n lower wages as companies try to adjust. But in healthier economies such as Germany n Austria, where unemployment is low and incomes are up, the most obvious impact is a boost to consumers' purchasing power.
At 0.4% in annual terms, euro zone inflation is far below the ECB's target of close-to 2%. A survey of purchasing managers released this week showed manufacturers cutting prices for a 2nd-straight month. The European Commission on Tuesday forecast inflation in the euro zone will remain below-target until at least 2016.
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Euro hits session lows vs. stronger dollar
The euro fell to session lows against the broadly stronger dollar on Wednesday as a victory for Republicans in the U.S. mid-term elections boosted the greenback and investors awaited the upcoming European Central Bank policy decision.
EUR/USD was down 0.46% to 1.2484, not far from the two-year trough of 1.2437 struck on Monday.
The greenback strengthened across the board after the Republican Party took control of the U.S. senate, riding a wave of voter dissatisfaction with President Barack Obama’s party at the polls.
The result boosted hopes for an end to political deadlock in Washington.
The ECB was expected to keep monetary policy unchanged at its monthly meeting on Thursday, but the Bank of Japan’s surprise stimulus move on Friday has fuelled expectations that it will soon follow suit in order to spur growth and inflation in the euro area.
Data on Wednesday showed that the euro zone composite services purchasing managers’ index, which measures activity across the region’s private sector, edged up to 52.1 from 52.0 in September, indicating only modest growth.
A separate report showed that euro zone retail sales dropped 1.3% from a month earlier in September, compared to expectations for a decline of 0.8%.
The single currency gained ground against the dollar on Tuesday after reports of tensions within the ECB over President Mario Draghi’s leadership style were seen as likely to limit its ability to implement additional monetary easing measures.
The euro was near seven month highs against the weaker yen, with EUR/JPY up 0.31% to 142.94 after rising as high as 143.45 earlier.
Elsewhere, the dollar was at seven year peaks against the yen, with USD/JPY advancing 0.77% to 114.48.
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Kuroda Has Draghi in a Bind as Euro Soars Against Yen
Mario Draghi has something new to worry about as he prepares for tomorrow’s European Central Bank policy meeting: the euro-yen exchange rate.
The yen approached a six-year low versus the shared European currency after Bank of Japan Governor Haruhiko Kuroda surprised investors late last week by extending his record stimulus program. Kuroda’s actions jeopardize the weaker euro that analysts say Draghi needs to reflate the economy, heaping pressure on him to come up with a policy response.
“Kuroda has thrown down the gauntlet to Draghi,” Robert Rennie, the head of currency and commodity strategy at Westpac Banking Corp., said yesterday by phone from Sydney. “Whether Draghi will, or can, accept the challenge remains to be seen.”
Unless Draghi emulates the large-scale government-bond purchases, or quantitative easing, of his BOJ counterparts, money borrowed cheaply in Japan could increasingly flow into European assets, propping up the 18-nation currency, Rennie said.
An ECB spokesman in Frankfurt declined to comment on strategists’ views that the BOJ’s actions pile pressure on the euro region’s central bank to expand stimulus.
Most analysts expect policy makers to refrain from changes at tomorrow’s meeting, while they remain split over the odds of sovereign asset purchases. Some see a higher likelihood of additional easing at the December gathering.
Photographer: Alessia Pierdomenico/Bloomberg
Mario Draghi, president of the European Central Bank.
The BOJ got out ahead of many of its peers by announcing on Oct. 31 that it raised the annual target for enlarging its monetary base to 80 trillion yen ($704 billion) from 60 to 70 trillion yen previously.
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thank you for the news
will begin to rise
Yesterday EURUSD is traded around 1.2490 after having fallen for a fifth day out of the last six as the pair is enjoying the strength of the American dollar.
Today we will have the ECB meeting on monetary policy that will certainly affect the market and the EURUSD. However, the 1.25 handle continues to be identified as the level where the battle is being waged right now. On Friday, the nonfarm payrolls will probably pronounce sentence.
ECB leaves rates unchanged; Draghi in focus
The European Central Bank, as expected, left interest rates unchanged at its Thursday policy meeting. The ECB's key lending rate, known as the refi rate, was left at 0.05%, while the rate the ECB pays on deposits held at the central bank remains at minus-0.2%. The rate on the ECB's marginal lending facility stands at 0.3%. Attention now turns to ECB President Mario Draghi's monthly news conference, set to begin at 2:30 p.m. Frankfurt time, or 8:30 a.m. Eastern, where investors will be looking for clues the ECB is preparing to engage in more aggressive policy easing to head off the threat of deflation.
Draghi: ECB unanimously committed to use unconventional measures if needed
Draghi: ECB unanimously committed to use unconventional measures if needed
Today the ECB is in the spotlight.
Will take up to assess the real impact of stimulus measures announced in recent months, especially after the first estimate of CPI reveal an increase in the inflation rate.
Was tempted to pass the idea that there is unanimity on the ECB President and his administration.
The main concern of investors based on their ability to achieve the proposed targets.
R3 - 1.26570
R2 - 1.26118
R1 - 1.25471
Daily Pivot - 1.25019
S1 - 1.24372
S2 - 1.23920
S3 - 1.23273