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Euro Turns Positive, but Expectations for Dovish ECB Keeps Traders on Edge

ForexSep 09, 2020 02:14PM ET
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© Reuters.

By Yasin Ebrahim

Investing.com – The euro eased from highs against the dollar Wednesday, as sentiment on the single currency remains cautious on concerns the European Central Bank is set to jawbone the currency lower in its latest policy update and economic outlook due Thursday.

EUR/USD rose 0.20% to $1.1802, easing from session highs of $1.1831.

The European Central Bank is widely expected to keep its benchmark rate on hold at 0.00% and its deposit rate unchanged at 0.50%.  

But because of concerns over the slowing pace of the recovery in the wake of resurgent Covid-19 cases, and the threat a surge in the euro poses to inflation, the central bank could put out the welcome mat for further easing down the road.

A stronger currency generally weighs on export growth and curbs import prices, leading to a slowdown in inflation.  

“In June, the ECB expected an inflation rate of 1.3% for 2022. Any downward revision will increase the likelihood of additional monetary stimulus,” ING said in a note.

The strength of the euro has already caught the bank’s attention. Just over a week ago, ECB's Chief Economist Philip Lane said that the euro’s level "does matter" for monetary policy.  

“There seems to be little doubt that a resolutely dovish tone will be struck at the (ECBP) meeting  … with President Christine Lagarde expected to once again remind markets that it remains ready to loosen monetary policy whenever it will think appropriate” ING added.

Euro Turns Positive, but Expectations for Dovish ECB Keeps Traders on Edge
 

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Comments (1)
Brill Smith
Brill Smith Sep 09, 2020 5:51PM ET
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The Euro will fail... design flaw. They didnt compound each countries debt into one.Good bye... dont bring your horrible policies here. We have enough problems with the way the far left think and the traitorous billionaires like Gates!
 
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