EUR/USD Back Near 1.16 on ECB Skepticism

The euro advanced the most in more than a month against the dollar amid speculation any additional stimulus measures announced by the European Central Bank at its policy meeting will fall short of analyst forecasts.

The greenback also declined amid speculation traders, hurt by the Swiss National Bank’s decision to remove its trading limit against the shared currency, are paring the market risk they are prepared to take. The Swiss franc dropped at least 1.1 percent against all 16 of its major peers, trimming its surge in the wake of the central bank’s removal of the 1.20-per-euro floor. The Danish central bank said it wouldn’t follow Switzerland abandoning its currency peg after it cut interest rates today. ECB policy makers will meet on Jan. 22 to discuss introducing new stimulus, including quantitative easing.

There are “some signs of short covering prior to the ECB on Thursday,” said Neil Jones, head of hedge-fund sales at Mizuho Bank Ltd. in London, referring to the unwinding of bets the euro will weaken. “My sense is some players believe a lot, if not all, of the QE announcements are priced in. The ECB may disappoint in terms of size.”

Bloomberg

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.