- Euro (EUR) ends longest uninterrupted rally since December 2013
- ECB expected to expand PEPP bond buying programme
- US Dollar (USD) looks to jobless claims data after ADP private payrolls smashed expectations
- At 08:15 UTC, EUR/USD is trading -0.2% at US$1.1209
The Euro is easing off multi-month highs on Thursday, snapping a 7 day winning streak against the US Dollar. The last tine that the Euro enjoyed such an extended uninterrupted rally was back in December 2013.
At 08:15 UTC, EUR/USD is trading -0.2% at US$1.1209 as the broad risk tone in the market struggles for direction and as investors look ahead to the European Central Bank monetary policy announcement.
The ECB is widely expected to increase stimulus today by expanding its Pandemic Emergency Purchase Programme. This would make the ECB one of the few central banks to increase stimulus this month, just as signs appear of the region’s economies turning a corner and starting to improve.
The ECB is expected to expand the PEPP, which aims to support those countries worst hit from the coronavirus crisis. The €750 billion programme is due to run out in October. The ECB could expand the programme by €250 – €500 billion and extend the time horizon.
Under normal circumstances, additional central stimulus would drag the currency lower. However, these are far from ordinary circumstances.
Stimulus is not the only factor which is driving the Euro; the common currency has also be supported by the recent risk rally which weighed on demand for the US Dollar and the mostly better than forecast PMI data.
In addition to further stimulus, investors will be watching the ECB GDP and inflation projection carefully. Both are expected to make for grim reading.
The US Dollar is picking up even as risk sentiment struggles for direction amid a lack of event drivers overnight.
Easing lockdown measures and optimism over the reopening of economies had been weighing on demand for the safe haven US Dollar. Better than expected data had added to the improving mood in the market. Yesterday ADP payroll data showed that -2.76 million private sector jobs were lost in May. This was significantly better than the -9 million forecast and the 25 million lost in April.
Investors will now look ahead to US jobless claims data, with analysts expecting the numbers to reveal 19.5% unemployment in the US in May, a level last seen in the Great Depression.
