Euro zone bond markets hunker down for the European Central Bank

On Wednesday, the dollar stabilized in a quiet market, with traders look to be waiting for a number of central bank meetings, most importantly the European Central Bank on Thursday. Futures pointed to a small opening loss for the Dow Jones Industrial Average after Wall Street closed slightly higher on Wednesday.

The Japanese yen was little changed, gold held firm to trade near its highest level in almost a year on safe-haven demand and copper hovered near three-year high on expectations of solid economic growth in China, while crude oil prices traded mixed amid easing supply concerns.

The yellow metal after U.S. President Donald Trump and congressional leaders unexpectedly agreed to. This is largely due to the large purchases of foreign bonds by Europeans (€41.3 billion), while foreigners returned to buying European bonds in May, for the first time in four months.

The call comes as Draghi and his colleagues start their regular two-day policy meeting in the central German city that some have argued should signal the end to its two-year, €1.2 trillion program of quantitative easing and negative interest rates.

The best that euro bulls can hope for is a hawkish bone from the ECB President during his regular question-and-answer session with the media, when he often goes "off piste" from the text agreed with his Governing Council colleagues. Those comments spurred a rally in the euro, pushing the currency past $1.20 for the first time since the European Central Bank announced the launch of its purchase program in January 2015. "With the continued economic recovery...the central bank can accompany the recovery by adjusting the parameters of its monetary policy instruments-not in order to tighten its direction, but to keep it broadly unchanged". "All the signs now point to a strengthening and broadening recovery in the euro area".

"Inflation is just moving sideways in Europe", said Jean Boivin, head of economic and markets research of the BlackRock Investment Institute.

In the environment of the past few years, markets have become very comfortable in interpreting the lack of official guidance on the policy normalisation as a green light to increase financial bets on the continuation of a low volatility journey, delaying the important consideration of (and positioning for) the destination.

"Since the introduction of the euro, there were significant movements of the euro-dollar rate".

Against a broad trade-weighted basket of its rivals, the dollar edged 0.2 percent lower at 92.14. Yields rise as prices fall.

Meanwhile, fell 3.3 cents, or roughly 1%, to $3.125 a pound, pulling back from their strongest level in three years.

Hong Kong's Hang Seng Index gained 0.3 percent.

Elsewhere, brent crude oil prices rose nearly 1pc to their highest levels since May as strong global refining margins and the reopening of US Gulf Coast refineries provided a more bullish outlook after sharp drops due to Storm Harvey. Some Chinese companies that operate overseas will likely benefit from a stronger yuan against the US dollar, said Alexander Lee, chief investment officer at Hong Kong-based Nimbus Capital Group.

Asian stocks were higher after Wall Street equities rose as investors weighed a US deal that ensures the funding of its government through mid-December against persistent geopolitical tensions.

West Texas Intermediate crude was down 0.1 percent to $49.10 a barrel after jumping 1 percent. Spot gold XAU= added 0.1 percent to $1,340.01 an ounce.

  • Zachary Reyes