- Asian stock markets extended gains on positive vaccine developments.
- More ECB monetary easing in December could drag on the Euro.
- EUR/USD rally starting to struggle
- EUR/JPY looks towards the 200-day moving average.
Stocks markets added to gains in the Asian session following Moderna’s encouraging update. Moderna’s covid -19 vaccine candidate was found to be 94.5% effective.
Australia’s ASX 200 rose 0.21% and Japan’s Nikkei 225 rallied 0.42%.S&P 500 futures dipped mildly lower.
In the FX markets, the safe haven US Dollar and Japanese Yen held steady while the risk-sensitive AUD, NZD, NOK and CAD declined.
US retail sales data for October and speeches from European Central Bank President Christine Lagarde and several members of the Federal Reserve will be in focus.
Dovish ECB to Drag on Euro
The Euro could slip lower as expectations grow that the ECB will ease monetary policy in December.
ECB President Christine Lagarde has indicated that the PEPP (Pandemic Emergency Purchase Program) and TLTROs (targeted longer-term refinancing operations) are the preferred easing tools, although all options remain on the table.
There is a very slight possibility that the ECB could consider lowering interest rates further, particularly after Governing Council Member Klaas Knot said that “we wouldn’t want to exclude any measure going into December”, recently..
Whilst a rate cut is unlikely the fact it hasn’t been ruled out could drag on the Euro in the coming days if upcoming data significantly undershoots expectations.
Euro-zone inflation data for October will be closely watched. Downbeat consumer price inflation data could increase easing bets limiting the Euro’s upside against the haven-associated USD and JPY.