The markets seemed to have disregarded the German Ifo Business Climate report as the Euro still managed to edge higher over the US dollar in the previous European trades, despite posting a fourth straight decline in August to 102.3 points. Comments from the European Central Bank (ECB) and the possibility of a concerted action from European officials sustained the single currency against the Buck. Meanwhile, expectations of another round of monetary easing by the Federal Reserve in September continued to weigh on the Greenback.
Market optimism continues to shore up the shared currency versus its peers. Speculations that the European officials are working together to tackle the debt crisis were fueled by reports that the powerhouse economies in the Euro Zone, namely Germany and France, would create a working group to boost the bloc, according to German Finance Minister Wolfgang Schaeuble. In addition, remarks from ECB President Mario Draghi that the central bank could possibly purchase government bonds to aid troubled Euro Zone economies, even though Germany’s Bundesbank opposes, primarily triggered hopes of its market intervention. According to Nick Bennenbroek, Head of Currency Strategy at Wells Fargo & Co. in New York, “The ideal situation would be for a compromise position between the Bundesbank and the ECB, as reported in Bloomberg News. “One way or another, these bond purchases are going to come through,” he added.
In the US, markets await this week’s speech by Fed Chairman Ben Bernanke at the annual economic symposium in Jackson Hole. Signs of further monetary easing would be closely monitored by the financial markets. The latest minutes of the Fed’s meeting revealed more policy makers gearing toward easing monetary policy to support the US economy. Because the Fed minutes increased expectations that another QE is indeed possible, the Greenback is likely to weaken. As such, a long position for the EUR/USD pair is recommended in today’s European trading session.
For more news, analysis, technical charts and candlestick analysis, visit AlgosysFx Forex Trading Solutions