Finance

Euro holds below 14-month highs before European Central Bank decision

Euro holds below 14-month highs before European Central Bank decision

Expectations for the Federal Reserve to raise interest rates again before the end of the year have diminished sharply in recent weeks, leaving the US Dollar generally biased to the downside. The 61.8% Fibonacci retracement from this week's low to high falls at 1.1490 to add a confluence. The ECB will, however, be very cautious in its statements, and the pace of monetary tightening is likely to be very gradual, much more dovish than that of the US Fed following the election of Donald Trump.

In last years, central banks have managed to give markets any sign about the direction of their policies, neither too dramatic nor excessively inaccurate. Today it is the turn for the ECB to take a further step towards the monetary policy easing in Europe. The ECB is scared straight about upsetting the markets and will thus tip toe into the likely September news of a tapering game plan. Many economists are predicting that growth will be north of 2 percent this year.

But policymakers speaking to Reuters earlier voiced concern about doubling German 10-year yields and the euro's 3 percent rise, fearing that a fresh signal now may be self defeating, pushing up borrowing costs and thwarting a broadening but still relatively young recovery.

The Bank of Japan will conclude a policy meeting on Thursday.

Housing starts increased a whopping 8.3%, reaching a seasonally adjusted annual rate of some 1.22 million units - the highest it's been since February.

The Euro has dropped against the Pound throughout today, with the EUR/GBP rate sat at 0.8835 at the time of writing. If they express optimism and the pair breaks higher, the next level to watch is the 2015 high of 1.1712. In 2018, it expects the figure to be about 1.3 percent and in 2019, that΄s projected to rise to 1.6 percent.

While the European Central Bank event will undoubtedly be the headline today, we will also get retail sales data from the United Kingdom as well as jobless claims and manufacturing and consumer surveys from the USA and eurozone.

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Even so, the US Dollar was able to regain some ground against the Euro on Wednesday morning as the initial reaction to the Republicans' failure to repeal the Affordable Care Act began to fade. Oil prices jumped, extending gains after a USA government report showed a bigger weekly draw than forecast in crude and gasoline stocks along with a surprise drop in distillate inventories.

The US Dollar was slightly supported by the result, with Brent crude oil already registering gains.

Dow Jones closed up by 0.28 percent, S&P 500 ended up 0.51 percent, Nasdaq finished the day up by 0.62 percent.

The euro was flat on day at 129.10 yen, off the 17-month peak of 130.76 touched last week.

Gold slipped back towards $1,240 an ounce on Wednesday, after three straight day's of gains, as the US dollar's recovered slightly from a 10-month low. S&P 500 futures were unchanged.

Oil prices jumped nearly 2 percent to a six-week high on Wednesday after a USA report showed a bigger weekly draw than forecast in crude and gasoline stocks along with a surprise drop in distillate inventories.