Euro had a widely positive day and edged higher against U.S. dollar on Wednesday ahead of the important ECB policy meeting that may enclose changes to the policy. The British pound jumped significantly higher following the U.K. GDP report.
Most Important Market Event: ECB Might Taper Its QE
In the last policy meeting of the European Central Bank, ECB President Mario Draghi mentioned that changes to the Quantitative Easing program are coming, probably in October, throwing all the pressure and expectations in the forthcoming meeting today. Following that announcement, EUR/USD rose sharply near its highest level in more than a decade. The world’s most traded pair added nearly 0.9% in a single day and jumped above 1.2000. ECB’s interest rate stands at 0% while the deposit rate is at -0.4%. The bond-buying program stands at €60 billion per month until December of 2017. Eurozone’s economy is currently on a sufficiently strong growing pace above 2% and its headline inflation rate averages nearly 1.6% this year, while the euro is at the highest level it has been in years. In addition, ECB raised its GDP forecasts for 2017 to 2.2%, the strongest pace of growth in ten years, signalling that the economy is ready for a reduction in the ongoing massive stimulus measures. As Draghi said, the case is not if they taper asset purchases but when. This meeting will be determinant for the euro’s future. Most of the market participants are anticipating to hear a tapering plan, though the strong value of the euro puts this scenario in doubt.
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