18.07.2019: ECB revises its inflation target, euro declines (EUR, USD, GBP, GOLD, CHF)
Traders are concerned over geopolitical risks and events connected with Brexit. Besides, expectations of dovish statements from the next week’s ECB monetary policy meeting put the single European currency under pressure.
According to the International Monetary Fund, the US dollar is overvalued by 6-12%. It is a rare occasion that the IMF provides comments about the exchange rates, so the White House administration may grasp at the chance of exerting more pressure on the Federal Reserve ahead of its meeting. Further on, the US dollar is weakening amid a fall in the Treasuries yield. At the same time, the euro’s upside is capped by expectations of the monetary policy easing by the ECB.
While the world’s major central banks are playing the policy easing game, the most traded currency pair is unable to break the level of 1.12. Today in early deals, the euro-dollar pair advanced to 1.1240, but during the European session the quotes retreated. The pair plunged to intraday lows after the ECB policymakers announced their intentions to revise the inflation target in the medium term.
Meanwhile, the pound sterling managed to recoup some of its losses yesterday and ended the day in the green zone. Today the GBP/USD pair advanced towards 1.2475, but it was unable to shrug off the bearish pressure. The British currency is totally dependent on political factors. It seems that markets calmed down after the Conservatives’ rhetoric on the hard Brexit. Now traders are waiting for the further moves from London and Brussels.
In early deals the safe-haven currencies including the Swiss franc gained ground. Gold prices also increased. Traders factored in the IMF comments about the overvalued American currency. Besides, a possible collapse of a trade deal between the United States and China worried market participants as well. During the European session the trend in both the Swiss franc and gold reversed. An ounce of the precious metal was trading at 1,420 dollars.
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