EUR/USD: Euro Draws Strength from Speculations of ECB Action

In the previous European trading session, the Euro gained versus the US dollar after the European Central Bank (ECB) said that President Mario Draghi would not make an appearance at this week’s Jackson Hole Symposium, turning all attention to Federal Reserve Chairman Ben Bernanke as he delivers his speech that would drop clues as to another QE to aid the US economy. In today’s European trading session, the single currency is expected to maintain gains versus the Greenback as hopes remain high of a potential bond market intervention by the ECB, and another monetary easing by the Fed.

The ECB said that Draghi would not be able to attend the Symposium as he prepares to lay down details of possible proposals that would be revealed at a meeting of the officials on September 6. Reports said that the central bank is trying to come up with a plan to purchase bonds aimed at reducing borrowing costs of those troubled countries that would exhaust first the remedy of seeking aid from the Euro Zone’s bailout fund. Also, comments from European Union President Herman Van Rompuy that the region’s bailout fund is ready to extend financial aid to struggling European banks are seen to support the common currency. Yesterday, Spain was able to sell Treasury bills with borrowing costs declining sharply, a sign that confidence could return if measures are taken to overcome the debt crisis.

Speculations that Bernanke would drop hints as to a potential monetary easing also aid the common currency. In the latest minutes of the Fed’s meeting, it was revealed that many members favor more measures to help the economic recovery of the US. A speech that would give signs of the Fed’s willingness to do more to boost the US economy is likely to weigh on the Greenback. With all these factors, a long position is recommended for the EUR/USD pair in today’s European exchanges.

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