Euro Surprises Everyone with Strength

This year, the market has had a habit of putting the traders into confusion with its response to different kinds of events. We saw a flash crash in the pound when everyone though that the worst was over once the crash surrounding Brexit happened. Likewise, when everyone thought that the dollar would be crushed when Trump was chosen as the President we got the exact opposite reaction with the dollar going on a rampage against all the other currencies and this continued for 2-3 weeks. And now, when everyone thought that the euro would be crushed due to the No vote in the Italian Referendum over the weekend, we saw the exact opposite as the Euro continued to strengthen through the course of the day and the EURUSD not only recovered the entire loss but also managed to push as far high as 1.0795 and continues to trade above 1.0750 as of this writing and looks good for more today.

The move was helped by the slight weakness in the dollar caused by the falling yields. We also have the ECB meeting in the later part of the week and the market is hoping that Draghi would announce a tapering of the QE program and spell out a timeline for ending the program as a whole.

The other major news of the morning so far has been the RBA rate statement which has left the rates on hold. They say that the economic data is expected to pick up in due course of time and they seem to have chosen to look beyond the bad data that they have been receiving over the past few weeks. They seem to be hoping for a turn around quite soon. All this did nothing to the AUD and it was barely unchanged through the announcement as the holding of rates was something that was expected.
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