Euro is on it’s highest level in a month to the US dollar around 1.1840. That was happened in the early European trading session yesterday. The Euro rally was triggered by the USD depression.
Besides that, the hawkish statement announced by the Bundesbank President is also the cause. The Bundesbank President, Jens Weidmann, is also the member of the ECB policy maker team.
Yesterday, he said that the EuroZone inflation speed has a risk to beyond the ECB target. He think that the temporary tractors behind the rising inflation lately may affect the basic price growth.
That is why; it can create the higher inflation rate in a long – term period. Furthermore, he alsobsrated that the risk of that increase is now more dominant than before.
The Loosened Monetary Policy Is Needed
The factors above may make the inflation and salary growth higher. If that thing happened, the inflation speed can increase in a more significant result in longer period of time.
Weidmann added that the loose monetary policy is still worth enacting, but the ECB should also be prepared to end its EUR1.85 trillion Pandemic Emergency Purchase Programme (PEPP).
The reason is because the economy is now soaring and inflation is rising. Weidmann argues that Germany's growth is currently resilient based on the data seen so far.
The third-quarter performance is likely to be even superior to the spring period that already exceeded the expectations. It is an optimism signal showed by an important person.
The Euro Position is Stronger
That Weidmann's optimism strengthened the euro's position against a wide array of major currencies. That is not only the eurodollar lifted, but also EUR/CHF, EUR/GBP and EUR/JPY.
Some market participants are unwinding the euro's short positions. However, some analysts argue the dovish voices from the ECB will start to "counter" Weidmann's rhetoric.
Chris Turner from the ING on his note said that if the dovish opinion is unheard again this week, the PEPP scheme idea that can be discussed in the ECB meeting may support the Euro.
It can support the Germany bund as well where their strategi team projected that the further 5 – 10 point basis increase can be happened. However, they must be steady enough.
Sterling is also Stronger
Elsewhere, the sterling is also stronger than the USD and Euro. It is because the investors are still anticipating the more complete US employment data, especially the non farm payroll.
Based on the schedule, that data will be released yesterday. The GBP/USD increased by 0.46 percent to the level of 1.3832 when this news was written yesterday night trading session.
In one week, there has been no timetable for the release of high-impact UK economic data or comments from the Bank of England officials regarding to the central bank policy.
Therefore, the movement of the Pound is purely due to the influence of the movement of rival currencies. The weekly unemployment claim in America last week declined to the lowest level.
The US dollar is still weakening
Nevertheless, the U.S. dollar remained weaker tonight as investors preferred to wait for the tomorrow's US NFP data. The Fed considers that it will be more considered in determining asset tapering
Jeremy Stretch as an analyst at CIBC said that the risk interest was the biggest backer of the strengthening pound. If the American’s NFP data proves weak, then it will add a little more strengthening.
That's because of the expectations of the employment data in that country are still strong. However, if the US NFP data is only slightly above expectations, another situation may occur.
It means that the strengthening of Sterling versus the US Dollar is likely to stall. So far, sterling is also stronger than the Euro. The pound versus Euro movement is also better right now.
