The euro is expected to continue falling, updating its two-month low against the dollar. Investors are waiting for a signal from the ECB about the beginning of the next phase of monetary policy easing, including a reduction in the rate and the resumption of bond purchases. The situation was aggravated by a more significant than expected fall in the German index of business climate. There is good reason to believe that the actions of the ECB will only increase pressure on the already besieged euro. Markets estimate the likelihood of a cut in the ECB's interest rate by 10 basis points at 50%, some expect Mario Draghi to set the stage for further rate cuts in the future, or to start a quantitative easing program. According to the Commodity Futures Trading Commission, hedge funds held short positions for the euro at $4.39 billion in the week ending July 16, at about the same levels as they were at the beginning of this year. The only thing that can help the single currency is the ECB's decision to wait until September to lower the key base rate. Given these expectations, some market participants see the euro strengthening against the dollar. These opposing views on the market were reflected in the volatility of the euro, which rose to 12.73 points, the highest level since December.
The Swiss franc, on expectations of lower rates in the euro area, soared to a new two-year high of 1.0963 against the single currency. The leap of the franc reinforced expectations that the Swiss Central Bank could weaken the currency in order to protect the export-dependent economy. Perhaps the regulator will reduce rates in September. But the Australian dollar expectations of lower interest rates led to a new two-week low of 0.6963 dollars.
The material has been provided by InstaForex Company - www.instaforex.com