Yesterday, the ECB left key interest rates at the previous levels (key refinancing rate is 0.0%, Deposit rate is -0.40% and lending facility rate is 0.25%). The ECB decision caused sharp rise in the Euro up to the level of 1.0870. The ECB announced that the program of asset purchase would be extended for nine months until the end of next year. At the same time, starting from April the Bank would reduce the volume of assets to 60 billion euro from 80 billion euro.
However, after the statement of the ECB Governor Mario Draghi that the Central Bank might extend the program to a longer period, the Euro started to fall sharply.
This statement triggered the rise in the 10-year U.S. Treasury bonds, which supported the USD.
Today, markets continue to assess the decision made by ECB and the Euro is quite stable. It is possible that at the end of the trading week some investors will take profit in the short positions on Euro, which will cause the rise in the Euro.
Now, traders will switch their attention to the meeting of the US Fed on 13-14 December. It is expected that the Fed will raise short-term interest rates. Investors also want to know future plans of the Bank in terms if the interest rates.
In the result of implementation of the plan to stimulate US economy, which was proposed by Donald Trump inflationary pressure may arise in the country. In this case the leaders of the Fed may revise plans and begin to increase interest rates in 2017-2018 more actively.
And this fact, along with the positive US macro-economic statistics may be the main driver of the rise in the USD.
Today’s news is as follows: at 12:30 GMT+3) - British consumer price index (this index along with the GDP is one of the most important indicators, which are taken into account by the Bank for making monetary policy decisions). Volatility in the Pound and in the cross-pair EUR/GBP will increase.