Draghi’s decision to extend QE inspires EUR bulls

Euro bulls were installed with inspiration following the ECB’s under delivery on the implementation of measures to raise inflation as quickly as possible. Investors were left empty handed with punctured expectations when the central bank decided to extend QE until March 2017, rather than increasing it as anticipated.

Despite the static inflation growth in Europe, deposit rates were cut by only -0.1% and this unsurprisingly dovish stance simply invigorated the Euro bulls. It seems that the ECB feels that the current health of the Eurozone does not warrant a reason to indulge in an aggressive easing package, and because of this the Euro may continue to rise until the NFP release later this week.

The EURUSD, a pair which had been previously bearish, experienced a sharp change of polarity with prices surging by over 300 pips to weekly highs of 1.052. The slight tilt in monetary policy divergence between the United States and Europe has encouraged buyers propel the once depressed currency pair .This pair may undergo more volatility this week depending on Friday’s NFP result which could send prices higher, or back down below the 1.064 intraday resistances.

Investors will now be shifting their focus to the NFP release on Friday, which has the ability to reinforce the growing expectations around a US interest rate hike in December. This week’s ADP printed above expectations at 217k and if the NFP follows the same pattern, Dollar appreciation may take center stage in the global currency markets once again despite the sharp decline today.

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