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Euro could be the primary Benefactor of Dollar Selling,but Take the Account of the ECB


If the dollar is destined to plunge next week; many of its counterparts will no doubt rally. But, in the event of a genuine trend change, where will the capital flow? The British pound is suffering its suffering economic and financial troubles that rival the United States and Australia is heavily dependent on exports. Positive growth projections, rates that have stabilized at a level that is at a significant premium to many of its counterparts and policy officials attempting to work down deficits (not to mention liquidity) make the euro the primary alternative to the world’s reserve currency. However, outside of the dollar’s influence, the currency will have its own fundamental drivers to worry about. Setting aside retail sales, industrial production and other secondary releases; the top event risk is Thursday’s ECB rate decision. President Trichet and his fellow policy makers aren’t expected to change the benchmark from its 1.00 percent perch; but their statement and his commentary in the Q&A session to follow can get the speculative wheels turning. Any dovish or hawkish leanings or changes to the covered bond purchase plan would be notable.

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