The Euro, on Wednesday, December 7 gained slightly on the dollar as investors focused on Thursday’s European Central Bank meeting for possible indications on when the apex bank may begin paring bond purchases under its quantitative easing program.
The euro has been the main focus for traders this week after Italian Prime Minister Matteo Renzi’s loss in a referendum over constitutional reform on Sunday.
Euro rallied strongly on Monday and has since held below three-week highs against the dollar as investors wait on the ECB, after initially dropping.
“The ECB we think is likely to announce an extension of the QE program beyond March 2017,” said Shaun Osborne, chief FX strategist at Scotiabank in Toronto.
The euro could extend gains if the ECB indicates a time limit to any QE extension, as investors watch for indications of tapering.
Osborne said any further euro strength is likely temporary as investors focus on higher U.S. growth prospects.
“The broader trends for the market beyond the holiday season should be dictated by stronger growth and rising interest rates in the U.S., and that should be positive for the U.S. dollar,” Osborne said.
The Federal Reserve is widely expected to raise interest rates for the first time this year when its policy-setting committee meets next week.
The euro EUR= was last up 0.25 percent against the dollar, at $1.0744, after hitting a three-week high of $1.0796 on Monday.
