EURO Gains on Renewed Hawkish Stance of ECB

The euro stayed near two-week highs against many of its rivals during early trading session today morning on rising bets the European Central Bank (ECB) may soon announce it will start winding down its massive bond purchase programme. The central bank’s chief economist Peter Praet, a close ally of President Mario Draghi, said the ECB would debate next week whether to end bond purchases later this year. Weidmann the head of Germany’s central bank, said expectations the ECB would taper its bond-buying programme by the end of this year were plausible while his Dutch counterpart Klaas Knot said there was no reason to continue a quantitative easing programme. Trio of comments drove the euro to a two-week high of $1.1800 sharp. As of writing this article the EURUSD pair is currently trading at 1.1796 seeing over 1.15% increase in value during this week’s trading session.

EURUSD Moves Higher

The renewed sentiment for a hawkish lean from the ECB and a subsequent normalization of interest rate procedures have firmed and German-U.S. spreads, supporting the euro. Investors are closely watching the pair for reversals on this event driven momentum with cautious approach to both sides of pair. However, short term trend seems to favor continued growth in EURO. Analysts believe that the current trend of pair seems to be highly influenced by event driven trading activity and possibility for the common currency to make a 100 pip jump on continued hawkish comments from Key officials during rest of this week’s trading session.

While ECB has begun discussions over possibility to end the 2.5 trillion Euro bond purchase program as members of policy committee believe that the threat of deflation has passed, Investors and traders are surprised by this hawkish stance from ECB as many analysts and traders believed that ECB would take a dovish stance owing to recent political climate among European countries such as Italy & Spain. However this hawkish stance by ECB is viewed by many as result of subdued political climate in Italy and with expectations of rate hike during US Fed session & ECB meeting scheduled next week and there is likely to be a sharp drop on Wednesday as traders could book profits from recent bull run and US Fed rate decisions momentum before ECB session commences on Thursday. Expected support and resistance for the pair are at 1.1775 / 1.1750 / 1.1720 & 1.1820 / 1.1850 / 1.1875 respectively.