EUR/USD – Euro Punches Above 1.08, Markets Await ECB Rate and QE Decisions

The euro has posted gains in the Thursday session, as EUR/USD trades at the 1.08 line. On the release front, the ECB meets to set its benchmark interest rate and whether to extend the bank’s asset-purchase program. In the US, today’s key release is unemployment claims, with the indicator expected to rise to 272 thousand. On Friday, the US will release the UoM Consumer Sentiment Index.

The ECB meets later on Thursday and is expected to maintain interest rates at a record low 0.00%. What will likely be of greater interest is the bank’s quantitative easing program, which is due to end in March. The markets are expecting the ECB to extend QE for another six months. What remains unclear is whether the bank will begin tapering off the amount of QE purchases, which currently stand at EUR 80 billion/month. Inflation and growth projections for the Eurozone have been revised upwards, so there is room to reduce the monthly purchases, perhaps by EUR 10 billion/month. If the ECB does lower QE purchases, this would mark a form of monetary tightening and the euro could respond with gains. There are rough waters ahead for the Eurozone, which must deal with the fallout of the Italian referendum as well as upcoming negotiations with Britain ahead of its withdrawal from the European Union.

The Federal Reserve meets next week for its monthly policy meeting, the first after Donald Trump’s election as president. The markets have priced a rate hike at 95 percent, most likely a quarter-point increase. This would mark the first hike by the Fed since last December, and market anticipation of a hike has translated into strong gains for the greenback. It will be interesting to see what happens early next year, with the Trump administration taking over in Washington. Trump has stated that he plans to increase government spending and cut taxes, which could lead to higher inflation levels. This means that the Fed may need to adjust its outlook when the new administration’s policies become clearer.

Italian Minister Says New Elections Could Happen in February

ECB to Continue Loose Monetary Policy But Details in Question

EUR/USD Fundamentals

Thursday (December 8)

  • 6:30 French Final Nonfarm Payrolls. Estimate 0.3%. Actual 0.3%
  • 12:45 ECB Minimum Bid Rate. Estimate 0.00%
  • 13:30 ECB Press Conference
  • 13:30 US Unemployment Claims. Estimate 272K
  • 15:30 US Natural Gas Storage. Estimate -44B

Friday (December 9)

  • 15:00 US Preliminary UoM Consumer Sentiment. Estimate 94.3

*All release times are GMT

* Key events are in bold

EUR/USD for Thursday, December 8, 2016

EUR/USD December 8 at 11:00 GMT

Open: 1.0759 High: 1.0805 Low: 1.0744 Close: 1.0793

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.0506 1.0616 1.0708 1.0821 1.0957 1.1045
  • EUR/USD was flat in the Asian session and has posted small gains in European trade
  • 1.0708 is providing support
  • 1.0821 is a weak resistance line

Further levels in both directions:

  • Below: 1.0708, 1.0616, 1.0506 and 1.0414
  • Above: 1.0821, 1.0957 and 1.1045
  • Current range: 1.0708 to 1.0821

OANDA’s Open Positions Ratio

EUR/USD ratio is unchanged in the Thursday session. Currently, short positions have a majority (58%), indicative of trader bias towards EUR/USD reversing directions and moving lower.

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.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.