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Euro gains after ECB’s stress tests on banks

Currencies Direct October 27th 2014 - 2 minute read

The European Central Bank carried out stress tests on banks in the region, and discovered a shortfall of 25 billion euros. However, the positive outcome from these tests was that French, German, and Spanish institutions were not required to find more capital. The euro has risen, as fears have been calmed with the major economies complying with the guidelines. The EUR/USD has rallied up to the 1.27 mark, where it’s currently trading. With weak numbers out from most of the Eurozone, today’s German IFO Business Climate Index reading should be closely watched by the markets together with a French bond auction. The week ahead is shaping up to be an important one for the Eurozone as inflation readings will be released.
 
With the Eurozone on the edge of a recession, and facing risks of a deflation, the US dollar seems to be at the opposite end. Positive readings from almost all sectors of the US economy are helping it hold on to broad strength against its major counterparts. Falling oil prices are looking like pushing down gas and energy costs, so the economy can only move ahead. With the stimulus programme drawing to a close, Wednesday’s FOMC statement should be a fairly important for getting directions on the way forward for monetary policy. Janet Yellen is likely to reinforce her stand that global economic risks are still looming, and the US Fed Reserve will keep a close watch with an accommodative policy, and accordingly time interest rate hikes fairly gradually.
 
A fairly quiet day on the economic data calendar for the UK as the CBI Distributive Trades Survey is the only event scheduled today. Data out from the US comprises of the Pending Home Sales Index and the Dallas Fed Manufacturing Index. GBP/USD currently trades at 1.6103.

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