(Reuters) – The euro edged back above $1.18 as speculation grows the European Central Bank will signal an end date for its vast stimulus program at its policy meeting on Thursday and after the dollar erased all its gains from a slightly more hawkish Federal Reserve.
Analysts said the dollar had failed to gain after Wednesday’s Fed meeting because investors may be able to see the end of its rate hike cycle, while in the euro zone monetary tightening is just beginning – a view that would be boosted if the ECB signals an end to its huge asset purchases at the end of 2018.
Speculation that the ECB will point to an end to quantitative easing have grown after several central bank officials said they would debate that decision, helping the euro to rebound in the last week.
“From a market point of view if we get a signal from the ECB about APP (asset purchase program) ending, this will be beneficial for the euro,” said Mathias van der Jeugt, a strategist at KBC. “Short-term the currency could go to $1.1830, heading to $1.20.”
As widely expected, the Fed lifted key overnight borrowing costs by a quarter percentage point for a second time this year, to between 1.75 and 2.00 percent.