The euro/U.S. dollar currency pair lost 0.749% in the last five days. The single currency is trading at 1.1193 after the ECB met expectations by keeping the interest rate and quantitative easing program unchanged. The central bank did remove the reference to rate cuts, and President Draghi praised the momentum of the economy, while at the same time warning of weak inflation.
The euro has been largely out of favor during the past five days and is set to end the week lower against most of her rivals. Thus, any strength in the pound is likely to be expressed in the euro/British pound currency pair in the short-term, as it was at the time of this writing.
The European Central Bank’s monetary policy decision is scheduled for tomorrow, along with the ECB press conference. Up until now, the ECB has resisted calls to start the process of tightening its policy. But there has been speculation that the Bank’s President Mario Draghi will start preparing the market about the prospects of tapering its massive QE stimulus program earlier than expected. There are two reasons for that: (1) noticeable improvement in Eurozone data and (2) pressure from Germany, where several officials including Chancellor Angela Merkel have recently called for tighter ECB monetary conditions.
Thanks to soft U.S. economic data of late, expectations about an aggressive rate hiking cycle by the Fed has diminished. This has weighed heavily on the U.S. dollar, underpinning the likes of the euro/U.S. dollar (EUR/USD) currency pair, gold and undermining the likes of the USD/JPY and USD/CHF.