Deliverance from the ECB

3 December, 2015

There is no doubt that ECB President Draghi has to deliver today at the ECB’s policy meeting. Back in October, he said that the bank were not in “wait and see” mode but “wait and assess”. This, together with other and subsequent comments, have been pivotal in pushing the downtrend on EURUSD in recent weeks. To do nothing would see a strong short squeeze on the single currency that would tighten monetary conditions, so the ECB seems to have little choice but to deliver. There is no single lever that the ECB can pull that will stem the deflationary threat within the Eurozone. Instead, the ECB looks set to deliver a package of measures to do the job, including a modest (10bp?) cut in the discount rate (already at 0.20%), alongside an extension and increase in the current QE program, due to expire in September of next year. As such, the one thing that is assured is further volatility on EURUSD.

Sticking with central banks, comments from Fed Chair Yellen late yesterday gave the market further assurance that the Fed is poised to tighten policy later this month, but also at a moderate pace. This meant that the dollar fell on her remarks, as she suggested that the pace of tightening moves next year would depend on “actual progress” in gains on inflation towards the Fed’s target. This fits with our feeling that the Fed will hike rates this month, but will indicate a modest pace of tightening thereafter, limiting the scope for further dollar gains into year end


Source link  
USD weakens through the day yesterday

The USD weakened further overnight after the move began in the US trading session yesterday. USDJPY moved down under the 110.000 level after...

Markets Focus on US and UK GDP

UK Gross Domestic Product (QoQ) (Q1) is expected to come in at 0.3% from 0.4% previously. Gross Domestic Product (YoY) (Q1) is expected to be...

Markets Focused on ECB Interest Rate

ECB Deposit Rate Decision will be announced and is expected to remain unchanged at -0.4%. The ECB Interest Rate Decision will also be released...


Today's Focus on US Retail Sales

At 12:30 GMT, US Retail Sales (MoM) (Mar) will be released, with an expected 0.4% from -0.1% previously. Retail Sales Ex-Autos (MoM) (Mar) is expected...

Larry Kudlow - chief economic advisor

Yesterday, Larry Kudlow accepted the role of White House Chief Economic Advisor. He immediately targeted China and said that the next step...

EU leaders agree to shore up budget

EU European Council Meetings took place on Friday and EU Council President Donald Tusk made the following comments: EU leaders agreed to spend...


A Terrible Week for the Dollar

The dollar is down 2.2% since the start of this week in what’s come to be the currency’s worst performance in two years, with USDX falling to 88.15 in a...

U.S. Inflation Data in Focus

A quiet week ahead on the data front at first glance but US Inflation on Wednesday will be a major market mover. Market participants will view this data...

USD Bears Return

USD bears returned to the market as the tensions between North Korea and the US have greatly cooled this week. North Korean media reported that North Korea Leader Kim had delayed...

  


Share: