Euro rallies against the Pound as markets brace for ECB's monetary policy decision

EUR/GBP appreciates for the sixth consecutive day to test last week's highs at 0.8645.
The Euro remains firm as traders brace for the ECB's monetary policy decision.
The Pound, on the contrary, is struggling amid PM Burnham's spending plans.

Guillermo Alcala FXStreet

The Euro (EUR) appreciates for the sixth consecutive day against the British Pound on Thursday, with bulls testing last week’s highs at the 0.8645 area. The Sterling remains offered across the board as investors wonder how the new cabinet will fund its spending pledges. At the same time, the Euro maintains its firm tone, awaiting the European Central Bank’s (ECB) monetary Policy decision.

The pair has rallied nearly 0.9% over the last few days and is on track for its strongest weekly performance since May, mainly due to the Pound's weakness. The soft UK Inflation figures released on Wednesday have dampened expectations that the Bank of England will hike interest rates anytime soon, while on the political front, Prime Minister Andrew Burnham's spending plans are starting to raise concerns about fiscal stability.

ECB keeps September hike in view

The Euro, on the other hand, maintains a bid tone, heading into the outcome of the ECB's monetary policy meeting. Analysts at Commerzbank expect the ECB to stay its hand for now while keeping the door open to further tightening later in the year. They argue that “it is likely still too early for an interest rate hike today, but we stick to our view that the next move - to 2.50% - will occur in September.”
By then, they say, “the ECB will have the new forecasts available, based on which another interest rate hike could follow, provided it continues to be deemed necessary.” From a currency perspective, however, Commerzbank experts remain cautious that “the euro is unlikely to benefit much from the ECB meeting, barring any hawkish surprises from Lagarde.”

Economic Indicator

ECB Rate On Deposit Facility

One of the European Central Bank's three key interest rates, the rate on the deposit facility, is the rate at which banks earn interest when they deposit funds with the ECB. It is announced by the European Central Bank at each of its eight scheduled annual meetings.

Economic Indicator

ECB Press Conference

Following the European Central Bank’s (ECB) economic policy decision, the ECB President gives a press conference regarding monetary policy. The president’s comments may influence the volatility of the Euro (EUR) and determine a short-term positive or negative trend. If the president adopts a hawkish tone it is considered bullish for the EUR, whereas if the tone is dovish the result is usually bearish for the Euro.

AUD/USD defies Iran war jitters as RBA hike bets double

The Australian Dollar rallies for the fourth straight day against the US Dollar as market mood remains positive amid high tensions in the Middle East, pointing to a resumption of hostilities, as reported by recent news. Despite this, the AUD/USD trades at 0.7027, up 0.44%.

USD/JPY remains confined in a familiar range below 158.50

USD/JPY sees some dip-buying in the Asian session on Wednesday, though it remains confined within a multi-week range near 158.50 as the uncertainty over the timing of the next BoJ rate hike keeps Japanese Yen bulls on the defensive. Meanwhile, hawkish Fed expectations, bolstered by inflation risks stemming from volatile oil prices, underpin the US Dollar. However, looming intervention fears could limit JPY losses and cap the currency pair.

Gold advances modestly; targets $4,150

Gold prices manage to reverse three consecutive daily declines, trading just below the $4,150 mark per troy ounce on Wednesday. The precious metal’s recovery comes amid a slight drop in the US Dollar, mixed US Treasury yields across the board and a widespread cautious tone from the US-Iran front.

Dogecoin Labs launches, resistance looms

Dogecoin (DOGE) Labs launched Wednesday in partnership with the Dogecoin Foundation, bringing together several product teams and technologies to expand the use of the memecoin (DOGE) across payments, decentralized finance (DeFi) and consumer applications. The launch will consolidate MyDoge, DogeOS and Such App under one business, led by Jordan Jefferson, founder of MyDoge and DogeOS.

What the midterm elections mean for Treasury yields, the Dollar and Gold

Democrats are priced to take the House, so November 3 comes down to the Senate and how much Washington can borrow without the other party. Treasury yields will show the answer first, then the Dollar and Gold. On November 3, Americans vote for all 435 House seats and 35 Senate seats. For bond prices, the result comes down to one thing: how much the government will borrow over the next two years.

The US Dollar fell. Gold didn't rally. That tells you everything

Gold (XAU/USD) is struggling to capitalize on a weaker US Dollar (USD), after repeatedly failing to establish itself above the $4,200 level. The precious metal remains confined to a relatively narrow trading range despite a combination of developments that would normally support higher prices.