Forex: EUR/USD rises to 1.2834

on Jul 10, 2013
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_iNVEZZ.com Wednesday July 10th:_ The euro firmed against the US dollar during Asian trading today and the EUR/USD has since risen to be at 1.2834 mid-way through the European session, an intraday high to this point.

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Yesterday the pair fell to a three-month low at 1.2753 after a senior European Central Bank functionary reiterated the bank’s commitment to low interest rates.
ECB executive board member Jörg Asmussen said that the Eurozone’s central bank may keep interest rates at record low levels for more than 12 months, and added that the ECB wouldn’t rule out another round of cheap loans, such as were used two years ago to pump capital into struggling Eurozone banks.

Despite a subsequent statement from Frankfurt that Asmussen had not intended to give guidance on the period for near-zero interest rates, some analysts see the comments as highlighting a key difference between US and European monetary policy.
Kathy Lien, managing director at BK Asset Management, observed: “Asmussen has given the market a frame of reference. As much as the ECB may say ‘we’re not ready to slap a timeframe on this,’ 12 months is what everyone is going to start looking at.” Lien elaborated: “The story is monetary policy divergence and that is why we will get the euro falling, sterling falling. Because we are getting the Federal Reserve being the semi-quasi hawk while everyone else is cowering in the corner, so this will continue to have an impact on markets in coming months.”

The euro’s recent slide against the greenback also reflects the different paths of ECB and Federal Reserve monetary policy. US Fed Chairman Ben Bernanke said nearly a month ago that fiscal stimulus ‘tapering’ could begin as early as this September in appropriate conditions, words which prompted a sharp rise in US interest rates and sent the greenback higher against all other majors.
The minutes of the June meeting of the Fed’s key decision-making organ, the Federal Open Market ommittee, are to be released at 19:00 BST today and are sure to be carefully dissected for any suggestion that more recent positive US news, and especially last Friday’s upbeat employment data, could prompt an accelerated end to stimulus.

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