Yesterday (12/11), the EUR/USD recorded gains for the second consecutive day and was the most powerful price increase day since early December. Ending the session, the pair closed at $1.08114, up 0.65% from the opening price $1.07413.
Between the session, the pair plunged to $1.0695 at 15:48 pm (GMT+7), after the speech of ECB president, Mario Draghi, on the ECB on track to deliver more easing measures to push inflation in the euro zone. The ECB may extend the quantitative easing program of 60 billion euros/month (mostly to purchase government bonds) in the Board meeting dated 3/12 ECB. Other measures include reducing interest rates, extending the stimulus program to March 9/2016 or buying local bonds. Fearing Euro fell over made the market sold off sharply.
But then, as investors waited for speech by President US Central Bank (Fed), Janet Yellen, as well as the fact that Ms. Yellen does not have any comments yet, related and reinforced expectation of Fed to raise interest rates in December, the pair EUR/USD has rebounded. After that, the pair even exceeded $1.08 after reporting fiscal balance deficit of 136.5 trillion US dollars, exceeding the estimate of 130.2 trillion.
However, at the end of the session, the pair recorded green color is due to:
Firstly, the Fed policy makers expressed consensually that, to avoid constraining economic development process, Fed’s plan of normalizing interest rates was slower than “increased 0.25% interest rate after each session ” which the Fed has mentioned before. This suggests that the Fed will tighten “loosely” than expected, interest rates slowed means prompting investors to reduce the expectation of stronger dollar. Weaker demand in USD pushed the pair to go up.
In a speech later by New York Fed President, William Dudley said that “the risk of acting too early versus too late is the same,” and the Fed should “consider carefully” before making a decision. Mr. Stanley Fischer, vice president of the Federal Reserve signaled the Fed will not let inflation low obstruct the tightening. These statements, which are not clear about the timing of rate hike did not support the dollar go up.
Secondly, in the market, USD is becoming a risky investment channel, upheaval, so weakening demand for dollars as investors switch to safer alternatives such as the Swiss Franc and Japanese Yen. USD over supply has pushed up prices.
Today, in Europe, markets will anxiously wait GDP data from a variety of European countries such as France, Germany, Italy and then the overall GDP and trade balance of the Euro zone. Although they are not the final figures (GDP Final version will be published later if the Preliminary GDP has error), they have a strong impact on the market. If the data are better than predicted, Euro will be supported upward.
In the US, a series of economic data on core retail sales (excluding food and energy), producer price index (PPI) and retail sales, consumer sentiment index…will be published. If these figures are positive, the Fed will raise interest rate in December, which encourage investors to increase investments in USD, pulling the pair down.
Currently, at 3:12 pm GMT+7, the pair is trading at $1.07724, down 0.37% compared with the opening price $ 1.08119
Forecast: The market overall is still in down trend amid market expectations of contradiction in for the Fed’s and the ECB’s policy.
From the results of the data have been published in recent days, figures from the US could be positive and affect the market much stronger than data from Europe, because the information will contribute to strengthening or undermine decisions of the Fed raising interest rates. The pair is likely to go down to the $ 1.06500.
However, if data from the US do not exceed expectations, the pair could climb to $1.08 threshold.