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Euro Weakness Continues with Tapering Announcement Expected

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  • Disappointing Euro Outlook Hurts Currency
  • Attentions Turn to Fed Meeting
  • Wall Street Trading Quietly Ahead of Decision

The Euro forex market, in particular, has showcased weakness today as it continues to struggle beneath the 1.16 level. These troubles can be placed at the door of disappointing data as final numbers come in from key economies for October, and also from dovish commentary from policymakers including ECB President Christine Lagarde. The focus for the day now shifts to the FOMC meeting which is due to conclude later in the day, with key announcements expected to follow on tapering. On Wall Street, traders are also waiting for the Fed press conference and policy decisions which could have a major bearing on market direction.

Euro Held Back as Recovery Stalls

Those forex trading the Euro had hoped for a resurgence in the common currency coming into this week. Such positive moves though have been short-lived. The Euro strength has been curtailed on a number of fronts, not least by the tone coming from the ECB which has reverted to being even more dovish than over the past few weeks. 

Christine Lagarde reiterated in her speech that an interest rate hike from the Central Bank within the next 12-months would be very unlikely and that despite the current inflation rate pressure, their long-term view remains unchanged with conditions for an increase unlikely to be satisfied. This comes on the back of confirmation that key economic numbers in both Germany and France were lower than expected in October. These manufacturing PMIs have had a negative impact on the region and Euro the same.

Fed Announcement in Focus

Forex brokers and traders alike have turned their attention to what most believe is an impending announcement of tapering that is to come after the conclusion of the two-day FOMC meeting. This is widely expected on an otherwise busy day for data with services PMIs to come following an above expectations number on the ADP jobs front. This may be welcome news for Fed Chief Jerome Powell who speaks later. 

Much of the debate is not around if or even when the tapering announcement will come, but more so whether the actions of printing less currency have already been priced into the market. Given the long build-up which has been speculated over many weeks, any concern over a taper tantrum may have been averted.

Wall Street also Hold Breath for Tapering

Recent weeks have seen very strong positive runs across the board for the major markets in the US. All three are trading at or near records, and the S&P 500 alone has notched 13 positive days in the last 15. 

A bumper earnings season has definitely contributed to a positive feeling on the street, trading is quiet today in the early hours though as traders wait for news from the Fed. It remains to be seen if there will be a draining impact should some supports be removed by policymakers.

Anthony is a financial journalist and business advisor with several years’ experience writing for some of the most well-known sites in the Forex world. A keen trader turned industry writer, he is currently based in Shanghai with a finger on the pulse of Asia’s biggest markets.

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