Belgium, (Brussels Morning Newspaper) The euro grew slightly on Monday, ahead of the European Central Bank (ECB) meeting slated for later this week.
Markets already priced in ECB rate hikes and discontinuation of the bloc’s bond-buying programme, but want the EU central bank to be clear about its plans, according to Reuters reporting on Monday.
The euro strengthened against the US dollar 0.2% on Monday, with hedge funds already stocked up on euro and speculators holding their largest net-long euro position in the last three months or so.
Enrique Diaz-Alvarez, Ebury financial services company’s chief risk officer, pointed out “the main question is whether the hike [in July] will be 25 or 50 basis points, and we expect [ECB President Christine] Lagarde to leave all options on the table for the July meeting.”
He noted that markets expect Lagarde to support the euro and reverse the EU central bank’s expansive policies.
According to money markets, the ECB will up the base rate some 130 basis points by the end of the year.
While the US dollar made gains on Friday, investors gave grown increasingly cautious about the currency as it reached its highest level in ten years or so in May.
The Chinese yuan reached its one-month high against the dollar after Chinese authorities announced plans to relax restrictions imposed with the aim of curbing the spread of coronavirus.
According to Beijing authorities, indoor dining will be allowed and other measures will be relaxed as the number of new infections declines, Chinese state media reported on Sunday.
Japan maintains expansive policy
The Japanese yen was near its multi-year low versus the euro and the dollar. According to analysts, the Bank of Japan will not move away from its expansive policy and low interest rates.
Haruhiko Kuroda, Governor of the Bank of Japan, recently pointed out that the bank wants to support the economy with its policies and added that its commitment to providing strong monetary stimulus was not wavering.
The Australian dollar remained steady on Monday, with the Reserve Bank of Australia to hold a policy meeting later this week.
According to economists who took part in a poll by Reuters, the bank will up interest rates by 25 basis points.
