The single currency is nursing some of its wounds this morning, after two days of consecutive losses and ahead of ECB policy decision later this afternoon. The euro is currently trading at 1.1033 to the USD, only managing to create a 50-pip gap from yesterday’s 3 ½ -week-lows of 1.0981.
Looking back and moving into today’s policy meeting, we note that today’s meeting is the first since the Brexit vote. The euro has been selling off consistently for the past three months and the resurge of concerns over Italian banks somehow creates the scenario for some possible action from the ECB. However historically the European Central Bank has not been known for taking the bull by its horns unfortunately. Consensus figures are not anticipating any rate changes.
The mood was predominantly positive in Asia today, with the Japanese Nikkei taking the cue from the weaker Yen, as traders are seemingly anticipating some significant economic support from further stimulus. Japanese media has been quoted as saying that the Japanese government is expected to have doubled the size of its originally- intended additional 10 trillion yen stimulus package through a supplementary budget.
In the meantime the yen continues to sell-off and the USDJPY has already made fresh 6-week highs at 107.49 this morning. The USD continues to be bid on anticipation of higher yields as some stronger earnings helping the case for a bolder economic recovery.
