Prior to the key meeting of the European Central Bank officials tomorrow to enhance efforts to deal with the debt crisis, the Euro ceded gains versus the Great British pound in the previous European trading session as optimism seemed to have not been sustained. Meanwhile, the Pound got back from its decline as activity in the services sector grew more than economic expectations. With markets pretty much expecting what the ECB is going to do when the officials meet tomorrow, the common currency is anticipated to go lower than the Cable in today’s European session.
Just this week, ECB President Mario Draghi told lawmakers in a closed-door session in Brussels that the central bank’s mandate requires it to intervene in the markets for the Euro’s survival. As much as there are high expectations for tomorrow’s meeting, the risk that the ECB could disappoint is also up, causing the shared currency to experience downward pressure prior to the meeting. It could be recalled that the German Constitutional Court delayed its adjudication over the matter of the Euro Zone’s bailout fund, the European Stability Mechanism, to give it more time to weigh on important factors before rendering a judgement. As such, thoughts are that Draghi could possibly hold back in giving details of the central bank’s bond buying plan until the judgment of the German court on September 12.
Meanwhile, markets also look forward to Thursday’s events as the Bank of England policy makers are set to meet and decide whether to inject more stimulus-measures to the economy. But the recent figures for the manufacturing and services sector could probably hold back the central bank from expanding stimulus. Given the economic numbers which seemingly signal a recovery of the British economy from a slump, the Sterling is expected to rise versus the shared currency. As such, a short position is suggested for the EUR/GBP pair in today’s European exchanges.
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