euro pre market-Euro to Strengthen on ECB Bond-Buying Program

The minutes of the last European Central Bank policy meeting reveal that it considered dropping its pledge to expand or extend its bond-buying program if warranted.

– That’s positive long-term for the Euro as it brings a tightening of monetary policy closer.

 

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The Euro advanced modestly and could strengthen further in the days ahead after the minutes of the European Central Bank’s policy meeting on June 7/8 revealed that it considered dropping its pledge to expand or extend its bond-buying program if necessary. While it decided not to do so, the fact that it was even considered suggests that a “tapering” of its monetary stimulus to boost the Euro-Zone economy is coming closer.

It will likely be discussed again in future meetings even though Euro-Zone inflation is currently weak, with the minutes noting that “if confidence in the inflation outlook improved further, the case for retaining this [easing] bias could be reviewed.”

EUR/USD climbed on the news but the reaction was mild as the central bank also stressed that it did not want to upset the markets by giving the impression that it was moving away from its policy of low interest rates and huge asset purchases.

Chart: EUR/USD Five-Minute Timeframe (July 6, 2017)

Euro to Strengthen as ECB Rethinks Expanding its Bond-Buying Program
Chart by IG

Nonetheless, the prospect of an eventual reduction in the ECB’s asset-purchase program should be a positive factor for the Euro.

 

-dailyfx

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Pramod Baviskar

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