EUR Rises Ahead of European Central Bank Policy Statement

The euro edged higher against the U.S. dollar on Monday, as market participants awaited the outcome of the European Central Bank’s meeting on Thursday for possible clues to future shifts in the bank’s monetary policy.

The dollar index , which measures the greenback against six rival currencies, was down 0.16 percent at 90.428, close to a three-year low, as the U.S. government shutdown weighed on sentiment.

Investors were also focused on a Bank of Japan policy announcement on Tuesday.

“Generally speaking the majors are all holding in familiar territory here ahead of a busy week of economic news and data, particularly on the central bank front,” said Omer Esiner, chief market analyst, at Commonwealth Foreign Exchange in Washington.

Analysts do not expect Japan to signal any policy shift.

The ECB is likewise unlikely to ditch a pledge to keep buying bonds at next week’s meeting as rate setters need more time to assess the outlook for the economy and the euro, three sources close to the matter have said. “If we get kind of status quo statements from both central banks, which is very likely, that could provide a little bit of a boost for the dollar,” said Esiner.

The idea of other major central banks moving closer to more normal policies has been a key headwind for the dollar over the last year. The greenback had a slightly weaker tone on the day but did not concede too much ground against most major currencies as a government shutdown in Washington largely failed to worry the market.

The U.S. government shutdown took effect at midnight on Friday after Democrats and Republicans failed to agree on a last-minute deal to fund government operations. The Senate scheduled a vote on a stopgap spending measure for noon on Monday.

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