The EURUSD exchange rate has a speech from European Central Bank President Christine Lagarde.
EURUSD – Daily Chart
The EURUSD surged on Tuesday, and the latest move has cleared previous resistance. That can set the pair up for further gains in the weeks ahead if the price remains above 1.1831.
ECB leader Lagarde spoke less than a week ago and may not deviate much from her previous comments. During that speech, she said that the “disinflationary process is over” and inflation was “in a good place”. She added that the domestic economy was showing resilience, but the French economy and leadership change have clouded that.
Ms Lagarde, who has a speech at 3:10 pm HKT on Thursday, also said that there was no rush to intervene in the bond market to support France. Political instability and its failure to tackle its growing public debt have worried investors in the bond market.
“Euro area sovereign bonds are orderly and are functioning smoothly with good liquidity,” she said after the ECB decided to keep rates on hold. French Prime Minister Francois Bayrou’s government collapsed, and a new leader has been quickly installed after a weekend of protests by frustrated citizens.
“There is also a set of rules… and the member states have to adhere to it,” Lagared said. “I’m sure that all governments, wherever located, will want to operate on the basis of that fiscal framework,” which does mean that the French situation has no immediate fix.
Fellow ECB board member Isabel Schnabel told Reuters last week that France had to take measures to consolidate its finances and boost economic growth. Still, she did not see that it would cause wider problems for the eurozone.
In the United States, the market was hinging on the future path of the Federal Reserve. Traders are hoping to see a succession of rate cuts from the Federal Reserve into year-end, and that will continue to be the case over that period.
The euro touched its highest levels in four years as traders expected to see a September rate cut, and also due to positive news from the German economy. The dollar has continued to suffer against global currencies, and the new highs in the euro suggest that the dollar’s weakness can continue.
“Speculation that the Fed could be on the brink of a series of rate cuts continues to chip away at the dollar,” said Jane Foley at Rabobank. A “better tone in German economic optimism release has reignited enthusiasm surrounding the euro,” she added.
