FXTM information and reviews
OctaFX information and reviews
XM information and reviews
FXCC information and reviews
FxPro information and reviews
HFM information and reviews

Special ECB announcement could rock the euro today

8 July 2021

The European Central Bank will announce the outcome of its strategic policy review at 11:00 GMT today, with a press conference by President Lagarde to follow 90 minutes later. Reports suggest the ECB will raise its inflation target to 2% and signal it will tolerate an overshoot if the situation demands it. 

This would essentially lock the ECB into negative interest rates for a longer period of time. It hasn’t been able to hit its inflation target for a decade now, so raising it further would imply it intends to keep its foot heavy on the money accelerator for years. 

Euro braces for special ECB announcement

That’s bad news for the euro. It would crystalize the imminent divergence of monetary policy between the Eurozone and America. With the Fed moving towards higher rates but the ECB staying committed to negative rates, yield differentials could widen further in the dollar’s favor in the coming years, which argues for a lower euro/dollar over time. 

The last time the world’s two biggest central banks drifted in opposite directions was in 2014-2015, a period of carnage for euro/dollar. The market impact might be smaller this time as the Fed will likely be less aggressive, but the direction seems clear. 

Dollar unfazed by Fed minutes, yen powers higher

The US dollar remained near its recent highs yesterday, taking little damage from the minutes of the latest FOMC meeting. The general sense in the minutes was that the Fed is not in a rush to scale back its humongous asset purchase program, but is moving closer to doing so. 

"Various" officials expected the conditions for tapering to be met ‘somewhat earlier’, while some others suggested they would have the information soon to make a judgment call on the economy. Nothing new there. The Fed is still on track to announce it will dial back its asset purchases in the fall, likely after a strong warning signal in August. For all that to happen, we need a couple of scorching-hot jobs reports. 

Meanwhile, the Japanese yen has been the biggest winner from the latest demolition in Treasury yields. Market participants are still mystified by what is pushing bond yields lower. Is it an epic short squeeze, is it big banks swallowing up bonds for collateral purposes, or is the market really pricing in slower growth and lower inflation? 

We’ll find out the answer by whether the move persists or not. For now, this has lit a fire under the yen, which thrives on lower rates and risk aversion. Still, with central banks across the world moving towards higher rates but the Bank of Japan not following suit, the big picture seems gloomy. 

Stocks drop as Chinese regulators flex

In the stock market, the S&P 500 and Nasdaq closed at another record high yesterday, but the mood has deteriorated today. Futures point to losses of around 1% for the major US indices when Wall Street opens today, in sympathy to equities in Hong Kong which are down almost 3% after new regulations from Beijing. 

Chinese regulators continue to tighten the screws on large multinationals, especially in the tech sector, announcing rules that would allow them to block companies from listing overseas. Tech heavyweights like Tencent and Alibaba are down 4% today. 

Finally, oil prices remain under heavy pressure for a third session. Market participants seem to be pricing in the risk of a ‘pump at will’ endgame from OPEC as the fallout between Saudi Arabia and the UAE continues, with the latest bouts of risk aversion adding fuel to the retreat. 

By XM.com

Share: Tweet this or Share on Facebook


EUR got stuck
EUR got stuck

EURUSD took a break in growing on Thursday. The current quote is 1.0840. The general market attitude remains favourable: investors are taking adequately the risks around...

31 Mar 2023

Is Bing a Google Killer?
Is Bing a Google Killer?

There was a time when Microsoft Edge was the most popular browser in the world, and people used Yahoo for searches. Then came Google and everything changed...

30 Mar 2023

Demand for risky assets is growing
Demand for risky assets is growing

The EUR/USD pair keeps rising and is trading at 1.0850. In addition to strong macroeconomic data, the euro is supported by the comments...

30 Mar 2023

EUR/USD & GBP/USD price action before economic data
EUR/USD & GBP/USD price action before economic data

This preview of the weekly data looks at EURUSD and GBPUSD, where economic data and the general financial situation in the banking industry are the main drivers...

29 Mar 2023

Calmer Markets & Weaker USD
Calmer Markets & Weaker USD

Banking stocks rose across the spectrum yesterday into the Asian and European sessions, easing worries over illiquidity and any further bank runs, for now...

28 Mar 2023

Pfizer stock rockets after $43 billion acquisition of Seagen
Pfizer stock rockets after $43 billion acquisition of Seagen

Pfizer (PFE) has announced that it will acquire Seagen for the sum of $43 billion (USD). The deal is expected to close in late 2023 or early 2024...

27 Mar 2023

Editors' Picks

FXCM information and reviews
RoboForex information and reviews
MultiBank Group information and reviews
MultiBank Group
Libertex information and reviews
Vantage information and reviews
FP Markets information and reviews
FP Markets

© 2006-2023 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.