ECB Risks

8 September, 2016

An ECB meeting is never a time to be complacent, but that’s the impression from markets at present. If you look at the average true range of EURUSD (2 week simple) has been languishing near the lows of the year over the recent week at around 0.75 cents. Measures of implied volatility in both equities and FX are also near to the lows of the year. The CVIX (Deutsche Bank) measures of implied (future) FX volatility is currently only just above the early August lows. All that said, the ECB President has a habit of dropping in the odd verbal bomb, just when you think it’s the most boring policy meeting and press conference ever.

For that reason, it’s worth staying awake during today’s proceedings. The fact is that the ECB is running out of options at this point in time. Rates are effectively below zero, the universe of bonds available for them to buy is rapidly diminishing and other lending schemes designed to support the corporate sector have met with limited success. At such points in time, Draghi does have a habit of thinking words are more powerful than actions. All that said, markets are becoming less believing of central banks who are rapidly running out of rope.

Overnight, we’ve seen the yen modestly firmer on the back of the final GDP numbers for Q2, which saw the quarterly growth number revised up from flat to 0.2% QoQ. Hardly anything to shout about, hence the limited reaction on the currency. Elsewhere, EURGBP has held onto the recent reversal, forming a base just above the 0.83 level. BoE Governor Carney yesterday robustly defended the BoE’s decisions and communication in the wake of the Brexit vote and kept the door open for more policy easing if needed.


Source link  
Trump's Tax Reform Plan

US Treasury Secretary Mnuchin announced Trump’s tax reform plan in a press conference...

Corporate Earnings Lift US Stocks

Last week the US President Trump stated on twitter...

Market Concerns Eased

The first-round voting of the French presidential election was revealed on Sunday night...


Dollar Plunged on Trump Second Statement

The dollar index fell to a 2-week low of 99.91 in the early hours...

Markets Eye on the First Trump-Xi Meeting

US President Trump and Chinese president Xi Jinping, are scheduled to meet today at Trump’s Mar-a-Lago resort in Florida...

Will the French Presidential Election affect EUR?

The first round of the French presidential election...


USD Firms Ahead of Q4 GDP Final Reading

The dollar index has rebounded noticeably from a 4-and-a-half-month low of 98.85, helped by outperforming...

Divergence Between Fed and BoJ

The March FOMC meeting will be held for two consecutive days from today. The interest rate decision will be announced at 18:00 GMT on Wednesday 15th March...

Market Volatility Expected Ahead of President Trump's Speech

In a speech that will be watched by millions of viewers in the United States and around the world, the President is expected to speak of his presidency and address pressing issues like his plans for health care, the tax system, the military, and his goals for his administration...

  


Share: