EUR/USD: ECB and Fed policies to diverge, lifting the Euro – MUFG

FXStreet Insights Team FXStreet

Near-term ECB policy outlook has been the driver of EUR volatility this week. A diverging monetary plicy between Fed and ECB is set to boost the Euro, according to economists at MUFG Bank.

ECB policy rate to reach 3.00% by the end of this quarter

“We are sticking with our forecast for the policy rate to reach 3.00% by the end of this quarter. A scenario that is not fully priced into the eurozone rate market which is currently expecting a total of 93 bps of hikes to be delivered at the February and March policy meetings.”

“We expect ECB and Fed policies to diverge at the start of this year with the Fed set to slow the pace of hikes to 25 bps in February in response to further evidence of softening US inflation. It continues to favour a stronger Euro alongside the improving cyclical outlook for the Eurozone that is currently being priced into markets as recession risks are pared back.”

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

USD/JPY: Bears remain in control with focus on 155.00

USD/JPY accelerates its severe pullback and slips back to the 155.40-155.30 band, flirting with seven-month lows on Thursday. The sharp decline in spot comes as investors continue to assess a potential rate hike by the BoJ as soon as its September 18 meeting.

AUD/USD ranges above 0.7150 despite upbeat Chinese PMI

AUD/USD struggles to capitalize on the previous day's bounce from a nearly two-week low and ranges above 0.7150 in Asia on Thursday, as dismal Australian trade data counter upbeat China's RatingDog Services PMI. However, the pair's upside remains in check as the US Dollar stalls the weak ADP report-led slide amid escalating US-Iran tensions and firming September Fed rate-hike bets.

Gold struggles to extend the bounce past $4,500

Gold adds to Wednesday’s gains and reclaims the area near the key $4,500 mark per troy ounce on Thursday. The strong decline in the US Dollar coupled with further weakness in US Treasury yields across the board also bolsters the move higher in the precious metal.

XRP defends key support, XLM awaits breakout as derivatives strengthen

Ripple (XRP) and Stellar (XLM) show divergent technical outlooks as traders assess whether the recent weakness could give way to a recovery. XRP is finding support and defining a key support zone, while XLM slips below a cluster of Exponential Moving Averages (EMAs).

Bitcoin steadies as markets turn cautious ahead of key economic data

Bitcoin (BTC) steadies around $77,700 on Thursday, trading sideways after its sharp rally during the second half of August. Institutional demand supports this range-bound price action, with spot Exchange Traded Funds (ETFs) recording mixed flows so far this week

Diesel’s record $100 warning: The oil shock hiding in plain sight

The Oil market may look calmer than it did a few months ago, but diesel is sending a very different message. The US diesel crack spread, the premium of ultra-low sulphur diesel futures over WTI, recently surged above $100 per barrel for the first time, reaching an intraday record of just over $102.00.