Tapering and extending

8 December, 2016

The main challenge for markets today will be steering through the messages that emerge from the ECB meeting and press conference. Whereas the Fed meeting next week is seen as a near certainty in terms of its outcome, this is not the same for the ECB. Under the current asset purchase program, which was started back in 2015, the ECB’s buying of bonds is due to end in March of next year. The indications are that this will be extended beyond this date. The two questions are by how long and how much. The ECB could continue to buy at the same pace of EUR 80 bln per month, let’s say for a further six months. But there is also the issue of tapering, so running down the asset purchase program. That could be indicated today, perhaps by reducing the pace of monthly purchases, but committing to buy for a longer period, i.e. longer than a further six months.

Either of the two scenarios above would put some downward pressure on the single currency, as the market is not fully positions for such an extension. But just as important for the currency reaction will be the press conference and comments from ECB President Draghi, so this should keep the potential for volatility on the high side vs. recent sessions. Elsewhere, the dollar index is hanging just above the 100 level, with 99.85 the next area of support below this.


Source link  
Bank of Japan interest rate decision

The Bank of Japan Interest Rate Decision was as expected and left unchanged at -0.1%. The Japanese 10-Year JGB yield target is around zero percent...

Oil Gains and GBP Stumbles

On Tuesday, the American Petroleum Institute said crude stocks in the United States fell by 7.4 million barrels last week. That is almost twice...

Geo-Politics will be the focus of the week

This week will be dominated by Geo-Politics as the US Tax Bill needs to be reconciled between the Senate and House, whilst UK Prime Minister...


Positive Economic Data for Euro and UK

Data released on Thursday from Markit Economics showed eurozone’s thriving economy powered ahead in November, with new manufacturing orders...

UK Growth Forecast Lowered

UK Chancellor Phillip Hammond delivered an Autumn Budget that appeared to be somewhat neutral in its content. More sobering was the updated forecast...

Eurozone economy is robust but...

Speaking at the Frankfurt European Banking Congress, ECB President Mario Draghi, commented that although the eurozone economy was robust...


Trump: Jobs, jobs, jobs!

Data released on Friday showed US job growth accelerated in October after hurricane-related disruptions in the prior month, but a sharp retreat in average earnings and an increase...

UK Interest Rates in Focus

The Bank of England is widely expected to raise UK interest rates for the first time in 10 years today. An expected 0.25% rise, to 0.5%, will push...

Strong US Q3 GDP Boosts USD

The US Commerce Department released Q3 GDP data on Friday, showing the US economy expanded at an annual pace of 3%. With the back-to-back...

  


Share: