EUR/USD: Euro Riding on Central Bank Hopes

In spite of fading expectations of stimulus action this week by the US Federal Reserve and the European Central Bank, the demand for the Euro opposite the US dollar continues to thrive.

The EURUSD opened at 1.2298 and has thus far increased to a maximum of 1.2316. Bullish momentum is apt to drive prices higher in the ensuing exchanges today. Key to the currency pair’s price activity today are speculations as to how the Fed will take action concerning the US economy’s slowdown due to weak job growth and the effects of the Euro Zone’s debt crisis.

Commodities and equities are posting gains, as ECB chief Mario Draghi’s pledge to protect the Euro buoyed the demand for higher-yielding assets. Ahead of tomorrow’s announcement from the ECB, US President Barack Obama said that his administration supported decisive action from EU policy makers to resolve the debt crisis following a telephone meeting with Italian Prime Minister Mario Monti. His comments where mirrored by US Treasury Secretary Timothy Geithner who also cautioned it will take a long time for broader economic and financial reforms to work.

“Within our mandate, the ECB is ready to do whatever it takes to preserve the Euro,” Draghi said. “Believe me, it will be enough.” With this, economists believe that Draghi and other new officials are more open about the options available.

European Central Bank President Mario Draghi has gone on the offensive by pledging to do whatever it takes to preserve the Euro. Draghi is trying to build a consensus among governments and central bankers for a plan to ease borrowing costs in Spain and Italy before ECB policy makers convene tomorrow.

Indeed, policy directives by the central banks are looked forward to boost the prospects of the single currency in the ensuing trades. As such, a buy bias looks apt for the EURUSD exchanges today. Be cautious though of likely price corrections as weak manufacturing PMI figures from the currency bloc are estimated to be released today.

Article by AlgosysFx Forex Trading Solutions