US markets were closed yesterday for the Labor Day but the US dollar continued to sustain losses against the Euro as the remarks of Federal Reserve Chairman Ben Bernanke as to a potential monetary easing this month echoed in the markets. After the Jackson Hole Symposium where Bernanke gave his speech, attention shifted to the upcoming meeting of the European Central Bank this week, where President Mario Draghi would likely signal a resumption of its bond buying program. In today’s European trades, the shared currency is expected to incline ahead of the key policy meeting of the ECB.
Markets appeared to have disregarded the lowered outlook for the European Union by Moody’s Investors Services as optimism seemed to be the dominating sentiment. Many hope that Draghi’s announcement of measures to tackle the debt crisis would work, together with the efforts of the European leaders who expressed support for the potential bond buying plan of the ECB. Draghi skipped the Jackson Hole Symposium last week to finalize the details of proposals that would be revealed within this week, generating thoughts about a potential bond market intervention by the central bank.
With regard to the Greenback, the Unemployment Rate report is much anticipated this week, considering that Bernanke highlighted it as a serious concern for the US economy. Any showing of further weakness would likely give weight to the contention of another monetary easing by the Fed. In consideration of the foregoing factors, a long position for the EUR/USD pair is recommended in today’s European trades.
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