Euro Soft Ahead of ECB Monetary Policy Meeting

The euro was soft today, falling against almost all most-traded currencies. The only exception was the New Zealand dollar, which failed to maintain the intraday rally versus the euro. While domestic macroeconomic data was somewhat disappointing, the upcoming monetary policy meeting of the European Central Bank was the main driver for the common currency of the eurozone.
The European Central Bank will make its last monetary policy announcement this year after the meeting on Thursday. The ECB pledged to expand its monetary stimulus, therefore markets expect a dovish policy announcement. The consensus among analysts is that the central bank will not cut interest rates further, focusing instead on the pandemic emergency purchase program (PEPP) and the targeted longer-term refinancing operations (TLTROs). It is expected that the ECB will increase the size of the PEPP by â‚¬500 billion and increase the amount of TLTRO operations by 4.
Some analysts pointed out that a dovish monetary policy was very well-communicated, meaning that it has been already priced in. That means that the euro may actually rise after the announcement, especially if the central bank does not do more than was expected, if traders choose the “sell the rumor, buy the fact”.
As for macroeconomic data, Destatis reported that the German trade balance widened to â‚¬18.2 billion in October from €17.6 billion in September. The actual value was slightly below the forecast figure of â‚¬18.7 billion. Both imports and exports rose, though both were still significantly below the pre-pandemic levels.
EUR/USD fell from 1.2102 to 1.2082 as of 21:12 GMT today, retreating from the daily maximum of 1.2147. EUR/GBP dropped from 0.9061 to 0.9014. EUR/NZD opened at 1.7179, fell to the session low of 1.7094 but has rebounded to 1.7202 later.
If you have any questions, comments, or opinions regarding the Euro, feel free to post them using the commentary form below.

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