FOREX-Euro pauses before ECB meeting as trade thaw triggers risk rally

Published 12/09/2019, 08:59
Updated 12/09/2019, 09:00
© Reuters.  FOREX-Euro pauses before ECB meeting as trade thaw triggers risk rally
EUR/USD
-
DXY
-

* ECB decision due at 1145 GMT, press conference 1230 GMT

* Trump's delay to scheduled tariff hike boosts markets

* China's offshore yuan gains 0.5%, Aussie hits 6-wk high

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Tommy Wilkes

LONDON, Sept 12 (Reuters) - The euro hovered near $1.10 on

Thursday as traders waited to see the scale of fresh stimulus

expected from the European Central Bank, while China's yuan and

Australia's dollar were buoyed by further signs of a thaw in the

U.S.-China trade war.

After a difficult August in which concerns about a global

recession sparked a scramble into safer assets, investors have

been returning to riskier markets this month, encouraged by

China and the United States making moves to ease trade tensions

and by receding fears of a no-deal Brexit.

China on Wednesday exempted a basket of U.S. goods from its

tariffs, while U.S. President Donald Trump said in a tweet he

would delay a scheduled tariff hike by two weeks in October.

Export-driven Asian currencies from Taiwan to Australia

rallied on the buoyant mood as the world's two largest economies

each granted concessions in their heated tariff dispute.

The Japanese yen, the go-to safe haven currency for nervous

investors, fell to a six-week low against the dollar. The yen

breached the 108 mark and was last at 107.98 yen per dollar,

down 0.1% on the day and far from its seven-month high of 104.46

plumbed last month.

The Aussie hit a six-week high and the offshore Chinese yuan

rose 0.5% CNH=EBS to a three-week high of 7.0737 against the

dollar.

Market attention now turns to the ECB, the first of a series

of major central bank events, with the Federal Reserve and the

Bank of Japan meeting next week.

Investors almost universally expect a rate cut at Thursday's

ECB meeting as policymakers try to prop up the region's ailing

economy.

The real uncertainty is whether policymakers will restart a

quantitative easing programme after some members of the

governing council in recent weeks expressed doubt about the need

to relaunch asset purchases. SEB strategist Jussi Hiljanen said he expected the ECB to

cut the deposit rate by 10 basis points, extend the forward

guidance on rates by six months and announce the restart of a

quantitative easing programme with monthly purchases lower than

the market anticipated.

"Such a package of stimulus measures would be a

disappointment for the market, pushing long rates higher and

EUR/USD higher and steepening the curve," Hiljanen said.

The single currency EUR=EBS has shed 3.5% since June and

was steady at $1.1017 in early European trade.

The dollar was slightly lower against a basket of currencies

at 98.599 .DXY .

Sterling was little changed GBP=D3 EURGBP=D3 . The pound

rocketed to a six-week high on Monday, reversing last week's

losses as investors welcomed the British parliament's move to

block a no-deal Brexit on Oct. 31.

Despite the more positive mood in risk assets this week,

analysts expressed some caution about its sustainability.

"Just as the presidential tweet on tariffs this morning has

injected more momentum ... we are only one social media posting

away from a thoroughly unpredictable President turning sentiment

on its head," said Jeffrey Halley, senior market analyst for

Asia Pacific at brokerage OANDA.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.