News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
EUR/USD
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Oil - US Crude
Mixed
Wall Street
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Gold
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
GBP/USD
Mixed
USD/JPY
Mixed
More View more
Real Time News
  • NZD/USD quickly pulls back from a fresh 2020 high (0.6968) as upbeat data prints coming out of the US economy spark a bullish reaction in the Greenback. Get your $NZDUSD market update from @DavidJSong here: https://t.co/zghuqNDKXP https://t.co/B5YZ0dWOtR
  • Forex Update: As of 21:00, these are your best and worst performers based on the London trading schedule: 🇬🇧GBP: 0.27% 🇨🇦CAD: 0.05% 🇳🇿NZD: -0.09% 🇨🇭CHF: -0.16% 🇦🇺AUD: -0.23% 🇯🇵JPY: -0.67% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/zBEnHG1OJ9
  • US 10-year Treasury yields aiming higher on positive vaccine developments after U-turning at Ascending Channel support A move back towards the November high (0.98) looks likely in the near term and could spell further downside for #gold prices $TNX $GLD #US10Y https://t.co/7TgKaDHLdB
  • Commodities Update: As of 21:00, these are your best and worst performers based on the London trading schedule: Oil - US Crude: -0.43% Gold: -1.90% Silver: -2.49% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/m88Pl31QW4
  • Michigan certifies election results for Joe Biden - BBG
  • Mexican Peso is carving the weekly opening-range just above downtrend support and while the broader risk remains lower. Get your $USDMXN market update from @MBForex here:https://t.co/7KPza6gEmZ https://t.co/u1Fdz3dwEI
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 93.33%, while traders in NZD/USD are at opposite extremes with 75.64%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/yjvp0kn5Ab
  • Indices Update: As of 21:00, these are your best and worst performers based on the London trading schedule: Germany 30: 0.07% France 40: 0.02% Wall Street: 0.01% US 500: 0.01% FTSE 100: 0.01% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/AWgEa62SzF
  • 🇰🇷 Consumer Confidence (NOV) Actual: 97.9 Previous: 91.6 https://www.dailyfx.com/economic-calendar#2020-11-23
  • Heads Up:🇰🇷 Consumer Confidence (NOV) due at 21:00 GMT (15min) Previous: 91.6 https://www.dailyfx.com/economic-calendar#2020-11-23
Central Bank Watch: BOE, ECB, & Fed Rate Expectations; EUR, GBP, Dow Positioning Update

Central Bank Watch: BOE, ECB, & Fed Rate Expectations; EUR, GBP, Dow Positioning Update

2020-10-28 15:45:00
Christopher Vecchio, CFA, Senior Strategist
Share:

Central Bank Watch Overview:

  • More weakness in Eurozone economic data coupled with a surge in COVID-19 cases has seen ECB interest rate cut expectations pulled forward, and the odds of surprise action at the October meeting are non-zero.
  • It’s still the case that neither the Bank of England nor the Federal Reserve are expected to shift policy in 2020; the Fed is grappling with the US election cycle; the BOE is awaiting Brexit.
  • Retail trader positioningsuggests that the US Dollar has a mixed trading bias.
Advertisement

European Central Bank Rate Cut Odds Pulling Forward

Eurozone economic data has been on a downward trajectory, and now that COVID-19 cases are surging once more, there’s a non-zero chance that the European Central Bank acts sooner than what interest rate markets are currently implying. While the late-summer jump in European Central Bank interest rate expectations has held, insofar as an interest rate cut deeper into negative territory will arrive sooner in the first half of 2021, it’s difficult to ignore the pandemic’s rolling impact.

EUROPEAN CENTRAL BANK INTEREST RATE EXPECTATIONS (OCTOBER 28, 2020) (TABLE 1)

Central Bank Watch: BOE, ECB, & Fed Rate Expectations; EUR, GBP, Dow Positioning Update

According to Eurozone overnight index swaps, there is just a 6% chance of a 10-bps rate cut at the October policy meeting and still just a 24% chance of a 10-bps interest rate cut by the end of 2020. Interest rate cut odds have been pulled forward in recent weeks; in mid-September, there was just under a 15% chance of a 10-bps cut before the end of the year. March 2021 is now favored for the move, according to rates markets, with an implied probability of 53%.

IG Client Sentiment Index: EUR/USD Rate Forecast (OCTOBER 28, 2020) (Chart 1)

Central Bank Watch: BOE, ECB, & Fed Rate Expectations; EUR, GBP, Dow Positioning Update

EUR/USD: Retail trader data shows 36.75% of traders are net-long with the ratio of traders short to long at 1.72 to 1. The number of traders net-long is 12.23% higher than yesterday and 16.15% higher from last week, while the number of traders net-short is 15.74% lower than yesterday and 21.33% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EUR/USD prices may continue to rise.

Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current EUR/USD price trend may soon reverse lower despite the fact traders remain net-short.

EUR Forecast
EUR Forecast
Recommended by Christopher Vecchio, CFA
Get Your Free EUR Forecast
Get My Guide

Federal Reserve Content with Standing Pat for Now

It still holds that little has changed with respect to the Federal Reserve, having enacted emergency interest rate cut measures and a slew of balance sheet-expanding operations. To this end, interest rate markets are still stuck in a state of suspended animation. Should the Fed change course, it will likely shift to via more QE, a repo facility, Municipal Liquidity Facility, etc.

FEDERAL RESERVE INTEREST RATE EXPECTATIONS (OCTOBER 28, 2020) (Table 2)

Central Bank Watch: BOE, ECB, & Fed Rate Expectations; EUR, GBP, Dow Positioning Update

Seeing as how there’s been no indication thus far that the Fed will cut interest rates into negative territory,we’ve reached the lower bound for the time being. In the future, if yield curve control is implemented, we would expect a similar outcome to what is being experienced by the Reserve Bank of Australia main rate expectations curve, especially now that the Fed has extended its promise to keep rates low through 2023.

IG Client Sentiment Index: Dow Jones (CFD: Wall Street) Forecast (October 28, 2020) (Chart 2)

Central Bank Watch: BOE, ECB, & Fed Rate Expectations; EUR, GBP, Dow Positioning Update

Wall Street: Retail trader data shows 53.86% of traders are net-long with the ratio of traders long to short at 1.17 to 1. The number of traders net-long is 4.64% higher than yesterday and 45.46% higher from last week, while the number of traders net-short is 1.49% lower than yesterday and 19.87% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Wall Street prices may continue to fall.

Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger Wall Street-bearish contrarian trading bias.

USD Forecast
USD Forecast
Recommended by Christopher Vecchio, CFA
Get Your Free USD Forecast
Get My Guide

Bank of England Rate Cut Odds Hone in on August 2021

The self-imposed Brexit deadline of October 15 on behalf of UK Prime Minister Boris Johnson has come and gone, but there is hope for a deal to come together by mid-November. It still holds that “asymmetric risk exists on the near-term horizon: volatility likely arrives in the unlikely situation that no deal is achieved; in turn, BOE rate cut odds are likely to either stay where they are or pull forward in the coming weeks, particularly as BOE policymakers discuss the prospect of negative interest rates more frequently and publicly.”

Bank of England Interest Rate Expectations (OCTOBER 28, 2020) (Table 3)

Central Bank Watch: BOE, ECB, & Fed Rate Expectations; EUR, GBP, Dow Positioning Update

It still holds that speculation surrounding negative interest rates remains premature at best, insofar as rates markets don’t foresee that kind of possibility from becoming reality until at least August 2021. An EU-UK trade agreement would further reduce the likelihood of a shift into negative interest rate territory by the BOE; the current course would likely stick for a few years, akin to the Federal Reserve.

IG Client Sentiment Index: GBP/USD Rate Forecast (OCTOBER 28, 2020) (Chart 3)

Central Bank Watch: BOE, ECB, & Fed Rate Expectations; EUR, GBP, Dow Positioning Update

GBP/USD: Retail trader data shows 50.50% of traders are net-long with the ratio of traders long to short at 1.02 to 1. The number of traders net-long is 8.51% lower than yesterday and 23.96% higher from last week, while the number of traders net-short is 6.49% lower than yesterday and 27.78% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBP/USD prices may continue to fall.

Positioning is less net-long than yesterday but more net-long from last week. The combination of current sentiment and recent changes gives us a further mixed GBP/USD trading bias.

GBP Forecast
GBP Forecast
Recommended by Christopher Vecchio, CFA
Get Your Free GBP Forecast
Get My Guide

--- Written by Christopher Vecchio, CFA, Senior Currency Strategist

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES