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Now the Euro takes centre stage

Now the Euro takes centre stage

We have a slow start to the week with very little in the way of data releases today during European trading hours. For the Euro, much of its price action will be dictated by speculation on how extensive the European Central Bank’s (ECB) change in monetary policy will be on Thursday.

The Euro finished last week positively off the back of USD selling and the decreasing likelihood of aggressive ECB easing on Thursday. The MNI Report on Friday showed that European policymakers are unlikely to do anything more than a 10 basis point rate cut, which seems to be priced in already.

However, the single currency could suffer if the talk of aggressive measures gathers traction ahead of the ECB rate decision on Thursday. There is speculation about possible tweaks in the QE program. Any combination of the following could hit the Euro hard: 

  • another six-month extension to the QE program
  • a variation in the collateral eligible under the purchase program
  • an increase in the monthly QE purchases.

GBPUSD closed in the 1.42 range on Friday and opened this morning at 1.4151 following a rebound from the Dollar. This was the first fall in GBPUSD for 5 days, but it is still in good shape after the recovery from multi-year lows near 1.3820 last week.

Although we have a quiet data day today, we have talks from Fed Vice Chair Stanley Fischer and Federal Open Market Committee (FOMC) Governor Lael Brainard this evening. It will be important to hear whether recent improvements in the US news flow has sparked confidence in policymakers and the talks may give insight into the direction of next week’s FOMC meeting.

Sterling takes a back seat today, still weighed down by Brexit uncertainty.

Data to watch:3pm US Labor Market Conditions Index (Feb). 6pm US Fed Stanley Fischer Speech.

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