The European Central Bank is about to make its decision and it seems that the euro cannot wait. EUR/USD is advancing towards 1.20. Can it continue higher?
Here is their view, courtesy of eFXnews:
ANZ FX Strategy Research argues that that there are 5 reasons to be skeptical that President Draghi will address euro strength head-on in any meaningful way at the ECB meeting on Thursday which could allow for some short-term upside risks.
First, the euro is not overvalued and its pace of appreciation has been relatively moderate.
Second, the current strength in the exchange rate reflects improved confidence in the euro area’s economic prospects and fading deflationary risks.
Third, the ECB is approaching the end of its current QE program and has recently dropped its previous reference to the possible need for lower interest rates.
Fourth, the average EUR/USD rate for the first eight months of this year has been 1.1050, compared with 1.116 for the first eight months of last year.
Fifth, it might confuse well-planned policy guidance to try and weaken the exchange rate at a time when the ECB will soon be providing details on the aftermath of its current QE program, which is widely expected to involve communication of details of a tapering program or reduced asset purchases at the 26 October meeting,†ANZ argues.
