- ECB widely expected to ease monetary policy
- Euro (EUR) trades higher as move already priced in
- US Dollar (USD) gives up gains even as stimulus talks stall
- US jobless claims & inflation data in focus
The Euro US Dollar (EUR/USD) exchange rate is advancing on Thursday, paring losses from the previous session. The pair settled on Wednesday -0.17% at US$1.2081 after easing back from a high of US$1.2148. At 09:15 UTC, EUR/USD trades +0.16% at US$1.21.
Attention is firmly on the European Central Bank monetary policy announcement later today. With the economic picture deteriorating on the old continent as covid cases rose and national lockdowns are extended, the central bank is widely expected to ease policy. Whilst a vaccine is coming, the near term outlook is dire.
ECB President Christine Lagarde as good as confirmed additional easing for December in the October meeting. Analysts expect the central ban to add a further €500 billion to the QE porogramme and extend it to December 2021.
The meeting comes at a time when the Euro is trading around a 32 month high versus the greenback. Euro strength not only hampers the blocs economic recovery but also inflation growth which is dismal right now.
The US Dollar rose versus a basket of currencies in the previous session, as a selloff in the US stock market prompted investors to seek shelter in the safe haven US Dollar. A lack of progress in US stimulus talks was also dragging on sentiment after Senate Majority Leader Mitch McConnel snubbed the White House’s latest $916 billion proposal. With Congress set to break on 18th December for Christmas holidays time is running out to clinch a deal.
Attention will now turn towards jobless claims data due to be released later. Analyst are expecting initial claims to edge higher to 725,000 compared to 712,000 the previous week as rising covoid cases and tighter lockdown restrictions impacts on the labour market recovery. A stalling recovery in the labour market would highlight the growing need for additional fiscal stimulus.