Euro rallies as investors anticipate ECB to pull the trigger
The single currency extended gains on Thursday amid mounting expectations the ECB will start discuss quantitative tightening and broad weakness in the dollar. ECB governor Praet said they could start discuss QE unwinding at next week ECB meeting. The recovery in German yields accelerated yesterday with the 2-year and 10 year yields climbing 5bps to -0.6% and 10bps to 0.48%. Nevertheless, they are not back to their pre-Italian crisis levels yet, which suggests that investors have not dropped their guard.
After having broken the 1.1745 resistance yesterday, EUR/USD is currently testing the following resistance area that lies at 1.1835-1.19. A break out of this area would open the door towards 1.20. EUR/CHF consolidated at around 1.1615 as USD/CHF fell another 0.40% to 0.9825. Overall, we maintain our bearish USD view, especially against the single currency.
