The most important event this week for the Forex market is US Federal Reserve policy meeting on June 19. Traders look for guidance about future Fed monetary policy. There will also be some events important specifically to the euro.
It is hard to make forecasts ahead of such major events as the Fed meeting because not only the exact decision of policy makers is not easy to predict, but the market reaction can also be quite surprising. There are three possible options.
1. The Fed does not change its monetary policy, neither it mentions any reduction to the quantitative easing program. This would hint that the central bank will postpone an end to QE and such decision can seriously hurt the dollar, helping the euro at the same time.
2. The Fed does indeed reduce its stimulus. Not many market participants actually believe that the bank will act so soon, therefore such decision can shock the market and hurt the euro, propelling the dollar upward at the same time.
3. And the most likely outcome: the Fed does not tamper its accommodation, but suggests that it is possible in the future. Reaction to such statement is hard to predict as everybody will pay attention to most minute details of statement’s wording and interpret them to guess the future actions of the US central bank. The general idea is: more hawkish the statement is, more negative it is for the euro.
As for the event specific for Europe, the Eurogroup meeting is scheduled on June 20, while European Central Bank President Mario Draghi will speak tomorrow. Quite a few economic reports will be released this week, including PMI figures. Yet most of the news will likely be overshadowed by the Fed.
DailyFX is positive for the euro, while Forex Crunch is less bullish, suggesting to be neutral on EUR/USD currency pair.
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