Euro, oil and metals pin hopes on ECB


The Euro rallied one percent to a high of USD 1.2621 yesterday, close the two month high reached on 1.2638 on August 31st. The Euro is trading nearly five percent up from its low on USD 1.2042 on July 24th. Stock markets in US were flat while Asia trades up after four losing sessions on renewed hopes that the European Central Bank (ECB) may present new tactics to counter the region’s debt crisis. All eyes are on Maro Draghi and the statement the President of ECB is going to deliver later today hopefully outlining details on the bank’s much announced bond buying program.

The strength of the Euro came after a string of leaks from euro zone officials underpinning expectations that Mario Draghi will live up to its earlier statement. Draghi stated in early August that ECB would take whatever steps necessary to boost and save the Euro. The ongoing rally in the Euro has seen the dollar index plunge to its lowest level in three and half months. The Australian dollar which has been under constant pressure over the last couple of months, bounced back after presentation of a surprise fall in Australian jobless rate.

The ECB meeting is seen as crucial for both the bank and Mr. Draghi’s personal prestige. Draghi has pinned his authority on a bond buying scheme. Buying of Spanish and Italian bonds will ease the pressure especially on these countries interest rates and their striving economies. A renewed ECB intervention in the euro zone’s bond market would give the Euro governments some spelling relief and give them time to come up with a longer term response to the bloc’s debt crisis.

Oil prices have been falling over the last two days. The development in the oil prices also very much depend on the outcome of the ECB meeting. Brent crude trades at 113,50. The future development of Precious metal prices are also dependent on whether ECB is able to deliver according to market expectations. So The situation for precious metals is likewise. Gold prices trading at 1695, shall be given a boost upwards with a detailed ECB plan for buying of bonds. The same is the situation for silver which yesterday saw its highest level in weeks reaching 32.60.

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