September ECB rate cut is the talk of the Forex town. Investors hope Thursday’s ECB meeting will give the clearest signal yet of likely policy easing, if not the details.
After weeks of speculation that interest rate cuts markets are betting on a September rate cut. The US/China trade war hurting euro zone exporters and expectations that Federal Reserve will lower U.S. rates at its July 30-31 meeting weigh too. ECB chief Mario Draghi last month flagged fresh easing to fight stubbornly low inflation. Fellow policymakers have backed his call.
Economists expect the ECB to change its forward guidance toward easing this week and cut the deposit rate in September. Waiting until September to cut rates gives the ECB extra time to deliver a package of easing measures. The latest ECB economic forecasts are also due that month and the bank tends to time big changes with these updates.
Forex has been stuck in trading ranges in recent weeks. Expectations for easing by both the Fed and the ECB more or less cancelled out the impact on the euro and the dollar.
START TRADINGForex – September ECB rate cut back in play
Foreign-exchange markets started the week waiting to see how much and how fast policymakers might ease policy. ECB will be the first on Thursday. The Fed will follow next week, as does the Bank of Japan.
The dollar index against a basket of six major currencies rose 0.1% to 97.203 after rising 0.4% on Friday. Analysts said the dollar was benefiting from a confrontation in the Strait of Hormuz, the oil trade’s most important waterway.
The dollar rose 0.1% against the yen to 107.89 after earlier breaching the 108 level.
The Swiss franc pulled back after rising to another two-year high against the euro. By 0730 GMT, it had shed 0.1% to 1.1023 after earlier plumbing 1.1013 francs per euro. The Swiss currency has benefited from investors looking for a refuge from worries about the euro zone economy.
The euro weakened to $1.12 after shedding 0.5% on Friday. The dollar gained on safe-haven demand amid rising tensions in the Middle East.
Sterling dipped to $1.2469, losing 0.3% to $1.2483. Investors waited to see whether Boris Johnson would win the Conservative party leadership contest, as expected. The pound was also 0.3% lower against the euro, at 89.995 pence.
Commodities/ Metals – September ECB rate cut back in play
In commodities, Brent crude futures were up 1.26% at $63.26 per barrel following an increase of about 0.9% on Friday. Iran’s Revolutionary Guards on Friday captured a British-flagged oil tanker in the Strait of Hormuz after Britain seized an Iranian vessel earlier this month. Tensions were raised further along a vital international oil shipping route. U.S. crude futures CLc1 advanced 1.33% to $56.37 a barrel.
Gold prices gained on Monday following a steep fall in the previous session. Tensions in the Middle East and weaker financial markets supported the metal. Spot gold was up 0.2% at $1,427.31 per ounce, as of 0735 GMT. The metal hit $1,452.60 in the previous session, its highest since May 2013, before closing 1.5% lower.
Silver rose 0.9% to $16.35 per ounce, while Platinum gained 0.9% to $850.73 an ounce.
PLEASE NOTE The information above is not investment advice.
Sources: Reuters, Investing, CNN money