The euro is making a hesitant start to the week after a weekend meeting between EU officials saw bickering politicians put the brakes on a plan to introduce a banking union in Europe. Nonetheless, the euro is likely to stay at the forefront of risk taking in currency markets this week after the US Federal Reserve launched another bond-buying programme that will see $40 billion injected into the US economy on a monthly basis. The Fed’s latest quantitative easing boost has given investors increased confidence, which may see a variety of safe haven instruments decline further over the coming days.
The safer yen is already backtracking quickly before the Bank of Japan announces its September monetary policy decision that could involve new, yen-weakening measures. With those expectations, and the Fed’s latest tactics, the pound could add to recent gains against the US dollar and yen although sterling will first need this week’s economic news to fall on the right side of forecasts.
Sterling
The British pound will be hoping for no surprises from Bank of England minutes that are due to be released this week as it approaches April highs against the US dollar; levels not far off one-year peaks. Notes from the central bank’s September 5 to 6 meeting are expected to confirm that Governor Mervyn King, and the rest of the rate-setting committee, have no intentions of applying even looser monetary policy in the short-term, which should allow for more gains for the pound.
US dollar
The US dollar will be looking for a little respite after its thrashing last week, which came after the Federal Reserve decided to use another programme of bond purchases to help reduce borrowing costs and bring down unemployment in the economy. The greenback reached its lowest point since February 29 against a group of currencies, a day after chairman Ben Bernanke launched QE3 at the Federal Reserve’s September monetary policy meeting, which is now its third quantitative easing scheme.
Euro
The euro is looking a little insecure after a meeting between EU officials over the weekend saw politicians disagreeing over plans to introduce a banking union in Europe. Protests in Spain have also increased the heat on leaders still discussing the idea of requesting a full-scale bailout, which will then give the European Central Bank powers to manage the country’s borrowing rates. Yet despite these political risks the single currency could still add to last week’s impressive gains that were largely influenced by the US Federal Reserve’s decision to engage with more dollar-diluting quantitative easing.