The euro stayed on the back foot on Monday, as investors eye the key ECB meeting expecting a new wave of monetary stimulus on Thursday.
Leveraged funds have increased their net short positions on the euro, expecting the ECB to cut interest rates. ECB may announce it will buy government bonds or other European assets, or both. Other global central banks are already loosening monetary policy, including the People’s Bank of China. PBOC on Friday cut the amount of cash that banks must hold as reserves.
Money markets are pricing in a 72% chance the ECB will cut rates by 20 basis points on Thursday. This is a slightly lower level of certainty than last week. Some analysts suggest the ECB will start buying euro zone equities, not just government bonds.
By 1040 GMT, the euro was steady against the dollar at $1.10335. It slipped to $1.10155 overnight, its weakest since Sept. 4.
The Federal Reserve will continue to act “as appropriate” to sustain the U.S. economic expansion. Fed Chair Jerome Powell bolstered expectations for a rate cut at the Fed’s meeting on Sept. 18.
Risk sentiment was also lifted on Friday after China said it would slash the amount of cash that banks must hold as reserves.
START TRADINGForex – Investors eye key ECB meeting
Financial markets around the world rose on Monday.
The dollar index, which tracks the U.S. currency against six other currencies, was flat at 98.33.
The dollar was also confined to a narrow range against the yen as traders weighed the prospect of U.S. rate cuts against their demand for safe-haven assets. Dollar/yen was last up 0.1% at 107.02.
The British pound turned positive to reach a six-week high of $1.2385 after better-than-expected British economic data. The fact that some banks have revised down their no-deal Brexit expectations weighed. Traders waited to see whether the British parliament would vote to hold an early general election before the Oct. 31 Brexit deadline.
Against the euro, sterling was up 0.6% at 89.17, having hit earlier a six-week high of 90.13.
Gold prices gained on Monday, crawling away from a two-week low touched in the previous session. Spot gold was up 0.3% at $1,511.80 per ounce, as of 1151 GMT. The metal touched $1,502.50 on Friday, a level last seen on Aug. 23.
Oil prices rose on Monday after the new Saudi energy minister confirmed expectations that there would be no radical change in his country’s oil policy. Brent crude futures were up 69 cents at $62.23 a barrel by 1343 GMT, while U.S. WTI gained 95 cents to $57.47.
PLEASE NOTE The information above is not investment advice.
Sources: Reuters, Investing, CNN money