Ahead of the European Central Bank’s decision, which will be keenly watched by investors and analysts alike, the Euro paused from its latest rally which took the common currency more than 2% higher versus the US Dollar. Many analysts believe that Mario Draghi, the ECB head, will point to the central bank’s goal of an inflation target of 2%, and despite the recent preliminary CPI numbers which showed unexpected improvement, many believe Draghi will talk down the Euro as an impediment to growth. The ECB will likely reaffirm that it is committed to the Quantitative Easing program of €1 trillion that is in place though there is also likely to be some upbeat noise regarding inflation and growth.
As reported at 9:21 am (BDT) in London, the EUR/USD was trading lower at $1.1119, moving away from the session high of $1.1190. Analysts say that the Euro’s rally was precipitated by the narrowing of yields between US Treasury instruments and Germany’s, with Germany’s 10-year Bunds rising to 0.74%. The EUR/JPY was also lower at 138.3130 Yen while the EUR/GBP flipped into the green at 0.7280 pence, a gain of 0.18% and midway in a tight trading range.
US Non-Farms Looms
Though the ECB news will dominate for the day, markets’ focus will turn to the US by Friday when the US Labor Department releases its monthly non-farms payrolls report. Markets are hopeful that the numbers will be at least the 225K new jobs that analysts are forecasting; anything lower will put the Dollar under pressure as speculation grows that the Fed will decide to continue to maintain ultra low rates as a result.