The euro advanced to its strongest level in two weeks against the greenback today, as traders expressed optimism that EU’s inflation will surge, forcing the European Central Bank to halt its planned monetary easing program.
The euro was 0.3 percent up at $1.38765 on Monday morning trade. It also rose 0.2 percent against the Japanese currency at 141.75 yen. Analysts expect April’s inflation in the Euro zone to surge0.8 percent, up from 0.5 percent in March. The data on consumer prices growth is expected on Wednesday, just before most markets around the world close for Labor Day.
“We are seeing some inflows into the euro,” Ian Gunner, a portfolio manager at Altana Hard Currency Fund, told Reuters. “Euro zone inflation should confirm that we have seen the lows. If inflation comes in line with expectations, we could see euro trading at $1.39 when the ECB meets next week.”
The market is also cautious as it awaits policy reviews by Japan and the United States. The Federal Reserve is widely expected to slash its monthly asset-purchase program, while the Bank of Japan is expected to retain its stimulus package when it meets on April 30. Analysts are monitoring three key U.S. pointers, which include Friday’s April labor data, Wednesday’s policy review, and first-quarter GDP statistics.
Should the indicators look favorable, the Federal Reserve is expected to slash its bond-buying program by $10 billion to $45 billion. The dollar held firm at 102.215 yen, with investors ruling out any significant changes on the yen if the Fed tapers due to the Japanese currency’s safe-haven appeal owing to the Ukraine crisis. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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