FXTM information and reviews
FXTM
93%
IronFX information and reviews
IronFX
92%
Libertex information and reviews
Libertex
91%
FXCC information and reviews
FXCC
90%
Markets.com information and reviews
Markets.com
89%
FxPro information and reviews
FxPro
88%

Euro steady ahead of ECB but stocks hit by market jitters


10 September 2021

The European Central Bank will probably join the taper bandwagon when it announces the outcome of its policy meeting later today. However, with some way still to go for the Eurozone recovery and a sizeable degree of uncertainty about the outlook, policymakers will likely attempt to avoid calling the move tapering so as not to spark a market tantrum. A sharper-than-expected slowdown in the pace of asset purchases would risk pushing up Eurozone government bond yields, which had climbed to elevated levels before the ECB intervened and stepped up its emergency bond purchases in March. Although the euro area’s recovery is somewhat more fragile than America’s, it’s difficult to see hawkish Governing Council members supporting this accelerated pace for much longer given the progress since March.

ECB to taper but call it something else

Bond yields have come down considerably from the yearly highs, the EU’s virus recovery fund is finally being disbursed among member states, and the economic data remain solid despite some easing in the growth momentum. More importantly perhaps for policymakers, inflation in the euro area hit a decade high of 3% in August.

President Lagarde will have to tread carefully in her press briefing to reporters if she does not want to see any reduction in the pace of asset purchases being perceived as tapering by the markets. However, even if today’s meeting turns out to be slightly more hawkish than anticipated, it’s unlikely the euro will be able to make significant advances as the bigger questions about how PEPP will be wound down will probably be put off until December.

Plus, investors will want to weigh the ECB’s taper plans with the Fed’s before substantially adjusting their euro/dollar positions. For now, the single currency has found some support above the $1.18 handle.

Dollar falls versus majors but yen climbs     

The euro’s steadier footing following three days of declines was mirrored by other majors as the US dollar’s rebound cooled off somewhat. The greenback is being pulled down slightly by lower Treasury yields, which came under pressure on Wednesday following the release of the Fed’s Beige Book.  The Fed’s regular update on economic conditions across its 12 districts pointed to a slight “downshift” in economic growth, adding to existing doubts about the outlook amid the ongoing Delta outbreak.

With central banks gradually removing or getting ready to trim their pandemic-era stimulus, markets are becoming increasingly anxious about how well the recovery will hold up.

The dollar’s broad retreat bolstered even the riskier pound and antipodean pairs. Sterling edged back above the $1.38 level and the aussie and kiwi were last up about 0.2%. Though, the overall mood was one of risk-off, which lifted the safe-haven Japanese yen against most of its peers.

Apart from the dollar’s pullback, the pound found support in more hints from the Bank of England that a rate hike is forthcoming next year following Governor Andrew Bailey’s hearing yesterday before a parliamentary committee. The Canadian dollar underperformed after the Bank of Canada cited some downside risks to the growth outlook even as it kept policy unchanged yesterday.

Stocks tumble on growth and China worries

Sentiment in equity markets was also dented by the growth concerns and fears that central banks might withdraw stimulus too quickly as the Fed looks set to announce tapering soon. Comments from Kaplan and Williams yesterday indicated the soft August jobs report hadn’t materially changed policymakers’ views on the timing of tapering.

Meanwhile, another round of crackdowns by Chinese authorities on the gaming industry slammed the stocks of gaming companies, not just in China but those listed in the United States as well. The Nasdaq Composite slipped 0.6% on Wednesday as the tighter regulations in China took the steam off the latest rally that had produced four consecutive days of record closes.

The S&P 500 and Dow Jones also closed lower and their futures were indicating a negative open today. However, despite the sea of red in global stock markets today, there were no signs of panic in China just yet, with the CSI 300 index ending the day marginally in negative territory. Investors will be watching more Fed speakers today as well as the debate in the House Ways and Means Committee plan on part of the $3.5 trillion infrastructure bill.

By XM.com
#source

Related

The Euro is holding the fort
The Euro is holding the fort

EURUSD remains strong in anticipation of the US statistics. The major currency pair is trying to keep its positive momentum. The current quote for the instrument is 1.1604...

15 Oct 2021

Dollar weakness supported risk appetite
Dollar weakness supported risk appetite

The euro rose on Wednesday as the dollar fell after the publication of U.S. inflation data. U.S. consumer prices rose in September as Americans paid more for food...

14 Oct 2021

Have the bulls got what it takes to push Euro to higher ground?
Have the bulls got what it takes to push Euro to higher ground?

The Euro on the H4 time frame was in a bearish trend until 6 October, when a lower bottom was reached at 1.15292. Bulls found the price attractive there and demand...

11 Oct 2021

The Euro managed to strengthen
The Euro managed to strengthen

EURUSD is rising a little bit on Monday afternoon; investors are hoping for a calm trading session. Early in another October week, the major currency pair is slowly growing...

11 Oct 2021

Euro Effectively Recovering
Euro Effectively Recovering

Early in a week, the major currency pair is growing; the asset is trading at 1.1585 and may gain even more weight. The greenback dropped a bit after the USA reported...

11 Oct 2021

EURUSD is trading at 1.1551
EURUSD is trading at 1.1551

EURUSD is moving below Ichimoku Cloud, thus indicating a descending tendency. The markets could indicate that the price may test Tenkan-Sen and Kijun-Sen...

7 Oct 2021


Editors' Picks

OctaFX information and reviews
OctaFX
86%
HotForex information and reviews
HotForex
85%
XM information and reviews
XM
80%
FXCM information and reviews
FXCM
79%
Vantage FX information and reviews
Vantage FX
78%
Moneta Markets information and reviews
Moneta Markets
77%

© 2006-2021 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.