Forex Markets Await ECB Rate Decision

NEW YORK  -- European shares are posting small gains ahead of the European Central Bank interest rate decision and press conference, which might have a crucial influence in the financial market.

Almost every market in Europe is trading higher, up to now, and the gains are relatively small. The Nordic markets are the best performing in Europe, with Finland advancing as much as 1.8%, at the same time the German DAX is up only 0.06%, while the European blue-chip companies advanced almost 0.2%.

The market's resilience to move higher comes as later in the day the governor of the ECB, Jean-Claude Trichet, is expected to hold a press conference, in which he will explain the latest developments in the euro-area economy and will comment on the interest rate decision.

Earlier Thursday, the Asian markets closed in the green, led higher by the Shanghai stock market, which surged 4.8%. This is a huge change from just a few days back, when the Shanghai index dragged the global markets into a risk-aversion phase. Also during the overnight session, the S&P 500 futures gained.

The major currencies overall advanced against the dollar during the European session, after a relatively flat Asian trade. The best two performing pairs were the aussie and the pound, which had a similar performance during the prior day of trading, while the swissy and euro moved the least, as investors prepare for the ECB's interest rate decision.

The last few ECB press conferences have sparked a lot of volatility in the financial market, and especially in the foreign exchange market. As such, some market participants say that this may be a good opportunity for the major pairs to break free from the range-bound trading seen during the last three months of trading. However, the momentum reads of the major pairs look deeply overbought right now, something that mixes the picture.

The euro bounced from the 20-day moving average in the early part of the day, and since then has moved mostly higher. The euro has a very busy calendar ahead as investors expect the ECB's interest rate decision, followed by the press conference shortly after. These two reports are known to create a lot of volatility in the financial markets, so special care should be taken.

The yen broke briefly below the 92 area during the early Asian session, but this move was quickly retraced. Since then, the pair only headed higher, reaching the neutral pivot point.