The euro was among the weakest currencies during the past trading week (though it still managed to outperform the Great Britain pound and the Japanese yen) after the European Central Bank surprised markets, expanding its stimulus program.
Things were not in favor of the euro from the very start of the week as the outcome of the Italian referendum sent markets into panic (though it was rather short-lived). Yet the main event of the week was the ECB meeting. The central bank made unexpected changes to its asset-purchase program, reducing size of asset purchases but extending the running time of the program till the end of the next year. Initially, the markets’ reaction was positive for the euro, but it changed quickly after traders realized that the changes in total resulted in extensions of stimulus, not tapering.
Now, traders turned their attention to the next week’s meeting of the Federal Reserve. Considering that most market participants believe that an interest rate hike during the gathering is almost guaranteed, the future does not look particularly bright for the shared European currency.
EUR/USD was up from 1.0664 to 1.0872 during the week but retreated to 1.0556 by the weekend. EUR/CHF opened at 1.0774, rallied to the high of 1.0897, but backed off to close at 1.0738. EUR/GBP ended the week at 0.8395, a bit higher than the opening level of 0.8379, after rallying to the weekly high of 0.8571. EUR/JPY advanced from 120.49 to 121.66.
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