Euro holds above $1.25
The single currency has managed to stay north of $1.25 in the overnight trading session, although it has been drifting lower as European trading gets underway.
The euro may extend its gains versus the US dollar as we are expecting an update from the Bundesbank at 11am (London time). Germany has been a strong opponent to full blown quantitative easing from the European Central Bank. Last week Germany eked out 0.1% of growth in the third quarter, so it is unlikely the country will change its tune and this could bolster the euro.
Mario Draghi is due to speak at the committee on economic and monetary affairs in Brussels at 2pm (London time). Mr Draghi is open to the idea of using full-on QE but I feel he won’t play that card until he absolutely has to. The latest CPI and GDP figures for the region came in at 0.4% and 0.2% respectively, while analysts had predicted readings of 0.4% and 0.1%. These stats do not warrant a round of QE, and if Mr Draghi suggests he is going to wait and see the euro could move higher.
The initial target for the euro is $1.26, and then the 50-day moving average of $1.2632 will be in focus. If that is cleared dealers will have their eye on $1.27. A move below $1.25 would put the 200-hour MA of $1.2460 in play, and if that is punctured then $1.24 will be on the radar.