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USD to gain further support, ECB in focus - Commerzbank
FXStreet (Córdoba) - As the FX market is increasingly pricing in a normalization of US monetary policy, the dollar will gain further support, said Esther Reichelt, analyst at Commerzbank. “However, the main highlight of the FX market’s week will be the ECB meeting on Thursday”.
Key Quotes
“The ECB is probably grateful that EUR/USD is likely to resume its downtrend following the FOMC report. Now that US central bankers have made it clear that they will stick to their normalisation schedule, FX investors’ attention is focussing on Europe”.
“On Thursday both the ECB and the Bank of England are due to take their monetary policy decision. The FX market expects both central banks to leave their monetary policies unchanged. However, as always the devil will be in the detail”.
“In the United Kingdom, current data suggests that the recovery is slowing down. The fall in inflation provides scope for the BoE to postpone a first rate hike. If the BoE also refers to the moderate data developments, sterling will continue to struggle. However, particularly against the euro, the pound is in a strong position”.
“The market expects further expansionary ECB measures in the coming months as long-term inflation expectations are no longer firmly anchored. The only question is what exactly these will look like. This means the FX market will listen very carefully to what ECB President Mario Draghi has to say”.
“Following rumours about the purchase of corporate bonds the market might be disappointed should the ECB assume a wait and see approach. However, that is likely only to temporarily slow the downtrend in EUR/USD”.