EUR Below 3 Week High Ahead of ECB

The euro held slightly below three week highs against the U.S. dollar on Tuesday, following a strong rally on Monday, as investors waited on Thursday’s highly anticipated European Central Bank (ECB) meeting.

The euro gained on Monday after Italian Prime Minister Matteo Renzi’s loss in a referendum over constitutional reform was viewed by traders as expected.

Investors are now focusing on the possibility that the ECB may take a more hawkish turn, even as it is widely expected to extend its bond purchase program.

“The short-term market is still short euros and I think they might be nervous – time to square up a little bit more ahead of the ECB meeting,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York.

The euro has retraced some of its weakness in recent weeks as investors see its fall as overdone and as fears that Italy will look to leave the euro zone in the near-term ease.

The euro had weakened since May on concerns about the stability of the euro zone region and on dovish central bank policy, while the greenback has gained on expectations of solid U.S. growth.

The surprise election of Donald Trump as U.S. President on Nov. 8 accelerated the dollar strength move, which many investors see now as having run too far in the near-term.

via Kitco

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza