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Euro fell despite no major data releases

Wednesday, Oct 19 2016
Euro fell despite no major data releases

There were no major data releases from Eurozone yesterday, with focus on ECB Meeting. Expectations management will be ECB President Draghi’s principal task on Thursday. In this context, he will not have the option of repeating last month’s strategy of saying nothing. In particular, Draghi is likely to push back against any suggestion that there will be any near-term move to tapering bond purchases. He is also likely to pledge a full review of policy for the December meeting and maintain the aggressive commitment to meeting the ECB inflation target.

 

The most likely outcome is that the Euro will weaken, although great caution is needed given the risks of aggressive short covering on any disappointment. If looking to trade on dovish rhetoric, buying European equities would be likely to offer better value. The ECB will announce its latest decision on interest rates on Thursday and there is no real chance that the main refi rate will be changed at this meeting. The main focus should be on the bond-purchase programme, especially given increased market speculation over the programme’s future.

 

Euro is currently being traded around 1.0970 level. Pair is likely to find support around 1.0930 area and resistance above 1.1020 handle.

Last modified on Thursday, 20 October 2016
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