Last week, the Jackson Hole Symposium in Wyoming where Federal Reserve Chairman Ben Bernanke delivered his speech was initially awaited by markets on clues of another monetary easing by the Fed. And in line with some expectations, Bernanke gave signals of the central bank's resumption of bond buying should the US economy continue to weaken. Consequently, the Greenback suffered against the single currency in the previous European trading exchanges.
During his much awaited speech, the Fed chairman said that the unemployment rate in the US remains a "grave concern" and that further monetary easing should not be ruled out. US jobs data scheduled for release this week is anticipated to reveal that US employers added fewer jobs in August. Said Mike Jones, Currency Strategist at Bank of New Zealand in Wellington, "Weak US data will now be seen as raising the chance of QE, which is US dollar negative," as reported in Bloomberg News. With the world's largest economy seemingly far from recovery, a potential QE is likely this month.
The European Central Bank is also set to meet this week and the common currency is expected to draw strength from expectations that the policy makers would by that time announce accelerated efforts to deal with the debt crisis. ECB President Mario Draghi opted not to attend the Jackson Hole Symposium last week to finalize the details of possible strategies that the central bank would implement to effectively deal with the debt crisis. As reported in Bloomberg News, Spanish Prime Minister Mariano Rajoy told Spain's ABC, Germany's Bild am Sonntag, France's Le Journal du Dimanche and Italy's Corriere della Seta in a joint interview published over the weekend that announcement by Draghi of intervention in the bond markets shows the robust will of the ECB to solve the problem. As such, a long position is suggested for the EUR/USD pair in today’s European trades.
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