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#1 07-12-2020 14:16:50

johnedward
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From: Paris - France
Registered: 21-12-2009
Posts: 3068
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EUR, CAD: 2 central banks will dictate prices this week

EUR, CAD: 2 central banks will dictate prices this week


The first week of the month is behind us, and we can literally say that it was a one-way street from a trader's point of view, as the USD fell everywhere. In addition, one of the three main events of the month has already passed - the NFP report.

That being said, this week's focus is on Thursday's European Central Bank meeting. However, on Wednesday, the Bank of Canada (BOC) will also announce its monetary policy decision, so price action this week should be interesting, especially on EUR and CAD pairs.

ECB dovish statement expected on Thursday

The ECB's decision could already have a price, as the central bank didn't hesitate to express its point of view. The market does not expect rate cuts but an extension of the quantitative easing programme and more favourable conditions for the TLTRO (Targeted Long Term Refinancing Operations).

The only problem for the ECB at this stage is that despite its dovish position, the euro is stronger in all areas. Moreover, this time it is not only the EUR/USD, but all euro pairs have been traded with a bullish tone recently. The EUR/USD, in particular, almost hit 1.22 on Friday, ahead of the NFP report.

Brexit still affecting the pound's price action

Brexit is still a strong theme for the financial markets. Negotiations are still ongoing, and this week is crucial to see whether the UK will move forward and break international law. If it chooses to do so, the risk is that all efforts to negotiate an agreement will be in vain.

US stocks remain at a high level

Last Friday's NFP report was disappointing in that it revealed a weak labour market in the US, a market that still has a long way to go to regain lost ground. Nevertheless, the weakness of the report did not prevent the job market from reaching new highs. The Dow Jones, in particular, traded and closed well above the 30,000 level based on a weak U.S. dollar.

Global equities reached $100 trillion last week, the highest level ever recorded. It is ironic, to say the least, that this is so in a time of pandemic, but it shows how difficult it is for investors to invest their capital in a world of negative interest rates and depreciating returns.

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