EUR/USD rally comes to a halt

Markets are waiting to hear the latest opinions of European Central Bank president Mario Draghi this afternoon.

Both the eurozone and the US have some significant fiscal issues looming in the near future, which will undoubtedly be in the forefront of Mr Draghi's mind.

For the US there is the ongoing question of when tapering to their quantitative easing policy will begin, as well as the reappearance of a deadline to the debt ceiling, which is currently due to be hit around mid-October. These issues have been on the market’s radar for some time and, looking at the way that the debt market has increased yields to over 3%, it appears that the beginning of tapering has been fully factored in.

Europe also has some big questions that need answering, particularly around the upcoming general elections in Germany and whether Angela Merkel still be running the country this time next month. Like all politicians she might not be perfect, but she is a known quantity and broadly speaking the European Union knows where it stands with her. Her departure would most likely lead to volatility; not something that the eurozone needs or wants at the moment.

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