The European Central Bank will hold its final policy meeting for this year and the market is expecting some positive news from the ECB. Due to the expectations favoring the European Union, Euro increased in value approaching its three-week high. Dollar, on the other hand, lost against Euro and slipped slightly.
The EUR/USD pair gained 0.18% and it was going at 1.0772. This is slightly less than1.0795 which was the value on Monday. This was the highest value since November 15th. This is good news for Euro who was facing a major blow after Brexit and election of Donald Trump.
It is highly expected that ECB will announce that it will extend its quantitative easing program worth €80 billion which was supposed to end in the March of 2017. However, it can also indicate that the asset purchases will be tapered soon. While the extension program is expected to be useful, uncertain conditions may prevail in the market due to the tapering of the asset purchase.
The referendum defeat of Italian prime minister Matteo Renzi caused Euro to tumble down and reach its 20-month lows very quickly. It was confirmed later that the Italian prime minister will quit and this can lead to an anti-EU government in the Italy. However, as soon as the government confirmed that there will be no immediate election, euro bounced back very quickly, gaining overnight. The Italian government has requested ECB to offer more time for the rescuing of Banca Monte Dei Paschi because it would be impossible to hasten the process with the current political condition.