EUR/USD firming toward intraday highs
Amid growing hopes for another round of central bank liquidity injections, dollar longs are being pared ahead of the weekend.
While this week was they key as far as economic data is concerned, next week is the key for the central banks, with the ECB meeting on Wednesday and the BOE on Thursday.
The ECB has the most options. It could annou8nce more LTROs (though there is not very much good collateral left in Europe to be pledged. It could restart the bond buying program. It could cut the refi rate to 0.75 or even 0.5% from 1.0%.
The BOE could add another GBP 25 or 50 bln to its QE program.
With US rates below 1.5%, it’s hard to see what good more Fed buying would do, but they could announce more in mid-June just to show the market they are doing something…
EUR/USD trades in the high 1.2430s, eying intraday highs at 1.2457. A bear-term bottom certainly appears to be in place and will be confirmed with a close above 1.2430. A correction could continue through the early part of next week before ECB jitters cap a bounce.
1.2625 would be the top of any rebound with 1.2565 a tough nut to crack along the way.