Euro shifts focus to ECB
Ahead of tomorrow’s ECB meeting, EURUSD has settled marginally above the 1.13 threshold and doesn’t dare to challenge the 1.14 barrier since the start of the week.
<p>Ahead of tomorrow’s ECB meeting, EURUSD has settled marginally above the 1.13 threshold and doesn’t dare to challenge the 1.14 barrier since the start of the week. After two days of declines, the euro makes some recovery attempts on Wednesday but the overall demand looks very limited due to growing concerns over the spreading political crisis across the EU.</p>
<p>On Thursday, the European central bank will end itsasset purchasing program and leave rates unchanged. This is priced in already so won’t have a significant impact on the euro and markets in general. Investors will pay more attention to Draghi’s tone as traders are trying to determine, when the regulator start hiking rates. Against the backdrop of developments in Italy, and now also in France, the central bank could push back market expectations, citing growing political risks in the region as well as signs of slowing economic growth.</p>
<p>Should the ‘dovish’ notes prevail in the ECB rhetoric, the euro could slip and derail the 1.13 figure. In the short term however, the EURUSD pair may gain support from the potential dollar weakness, if the US CPI disappoints. Technically, the price needs to overcome the 1.14 hurdle to target 1.15 again. The longer the pair stays below this important resistance, the more aggressive bearish risks could become. </p>