The Euro/USD is moving very slowly up in the past couple of weeks and yesterday it slightly increased again. The ECB will announce of the second LTRO three year loan plan to struggling EU banks. This may affect the direction of the Euro/USD today. There are additional events and reports on today’s agenda including USD GDP report, Bernanke’s testimony and EU inflation update.
Here is a short outlook for the Euro /USD for February 29th:
Forex Market February Update:
The Euro to US Dollar slightly rose by 0.46% on Tuesday to 1.3458; during February, the EUROS/USD increased by 1.27%. Furthermore, the GBP and CHF also appreciated against the USD.
The chart below presents the recent rally of the Euro to US Dollar during February (UTD).
ECB will announce the second three-year loan to European commercial banks. The total LTRO fund could reach as much as €1 trillion. This LTRO fund helped rally the Euro in the past and is probably behind the successful sovereigns’ debt auctions of leading EU countries such as Italy and Spain.
Once the announcement will be made it could help boost the Euro.
Correlations among Exchange Rates –February 29th
The chart herein shows the development of the linear correlation (moving correlation) between the CHF and the Euro/U.S dollar (daily percent changes) during recent months (up to February 28th).
Based on the chart the relation between the two exchange rates has strengthened. Currently the linear correlation between the two daily percent changes of these currencies is nearly -0.97 for February. This might suggest the influence of the Euro/USD on the direction of the USD/CHF is strong and robust.
Current Forex Indexes February 29th
Euro to US Dollar is traded at 1.3386 a 0.54% decrease as of 15:38*.
GBP to USD rate is at 1.5941 a 0.25% increase as of 15:38*.
Forex Related News for the Day
Euro Area Inflation: the inflation in Euro Area reached 2.7% in January, while to core CPI reached 1.6%. If the inflation rate will continue to fall, it may raise the chances of an additional ECB interest rate reduce;
Bernanke Testifies: following the recent FOMC decision to lengthen the pledge of keeping rates low until late 2014, the speculations around another stimulus plan remains high. The Chairman will testify before the Committee on Banking, Housing, and Urban Affairs; the title of the speech is “the Housing Market”;
U.S GDP for the Fourth Quarter of 2011: This will be the second estimate of U.S’s fourth quarter 2011 real GDP growth. In the first estimate for 4Q2011 the GDP growth rate reached 2.8%; if there will be sharp change from the first estimate it could affect the strength of the US dollar.
Euro to USD Daily Outlook
I speculate the Euro will continue its upward trend even if there will be some hiccups along the way. The second LTRO package and the upcoming news items from EU and US may also play a role in today’s Euro/USD trading.
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