US Dollar, EUR/USD Talking Points:

September ECB On Deck

We’re now less than 24 hours away from the September ECB rate decision. There’s already been a range of ideas thrown out by ECB members as to what can be expected tomorrow. Just hours after the July rate decision a ‘source’ indicated that the bank had pretty much agreed on another cut deeper into negative territory at tomorrow’s meeting. Since then, the main topic of interest has been QE, with hints in both directions that a) the bank may be soon considering something in that realm and b) that it’s far too early to be discussing such matters. Accenting the backdrop is the fact that Mario Draghi’s tenure atop the bank is winding down and incoming ECB President Christine Lagarde is set to soon take-over, making for an inopportune time to institute new highly-experimental monetary methods that a new President will have to manage.

A day ahead of the rate decision and some trends have already shown around this theme. The US Dollar has caught a bounce as EUR/USD has driven back-down to the 1.1000 handle.

EUR/USD Two-Hour Price Chart

Chart prepared by James Stanley; EURUSD on Tradingview

The US Dollar Bounces Ahead of ECB, FOMC

Going along with this stern drop in the EUR/USD has been a vivid bounce in the US Dollar. The US Dollar came into the week on its back foot following an aggressive push-lower last week, and next week’s FOMC rate decision looms large on the economic calendar. Of recent, expectations for rate cuts around the Fed have been diminishing and the big item of interest is the bank’s Summary of Economic Projections due at this quarterly meeting. The Fed cut rates in July for the first time in a decade but, as yet, haven’t provided updated projections for their forward-looking plans.

US Dollar Daily Price Chart

Chart prepared by James Stanley; US Dollar on Tradingview

To read more:

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--- Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX