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European Currencies Pricing in Expected Rate Cuts

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pakuratneya
1
3 months agoSteemit2 min read

The EUR has faced a rough week thus far. Currently losing against every major currency rival, the EUR may in fact be pricing in tomorrow’s expected rate cut by the European Central Bank (ECB). Declining to 1.2525 against the USD in today’s early trading hours, and down to 0.8900 against the GBP, the EUR is a little worse for wear.

Typically before an important interest rate decision by the ECB, traders begin to anticipate the policy decision and price-in the impact a day or two ahead of schedule. As such, we may likely be seeing a depreciation of the EUR as most traders are near 100% positive that the ECB will in fact slash rates by 50 basis points tomorrow around noon. Moreover, we may likely see a continuation of this pricing-in up until the moment of its announcement.

However, if for some reason the ECB follows Australia’s lead and decides to hold rates steady, there will be a dramatic shift into an upward correction for the EUR pairs and crosses as traders re-value the EUR in a positive direction. As this is unlikely, given recent European economic news, traders are likely to see just such a rate cut.

Looking at today, with very few indicators being released from the Euro-Zone the driving force behind the movement of this currency is going to be Dollar news and the anticipation of tomorrow’s interest rate cuts by the ECB and Bank of England (BoE). These rate cuts appear to be in the foreground to this week’s trading as many traders are making large profits off the movement which typically follows such an announcement.

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