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
Mixed
Oil - US Crude
Bearish
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
Bullish
GBP/USD
Mixed
USD/JPY
Bearish
More View more
Real Time News
  • #Silver has strengthened today, now up over 2%. The precious metal rose from below 26.00 to an intraday high around 26.50, a fresh one month high. $XAG $SLV https://t.co/WlqkMXozH0
  • RT @EnronChairman: I passed a billionaire on the freeway this morning: https://t.co/r7SPRH0zld
  • US 20yr Treasury Auction: - High Yield 2.144%, WI 2.153% (prev. 2.29%) - Bid/Cover 2.42 (prev. 2.51) - 17.74% allotted at high $USD
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Silver are long at 91.20%, while traders in Wall Street are at opposite extremes with 67.57%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/tvymgzx8Cp
  • The US Dollar has dropped to an intraday low after attempting to move higher today. The $DXY rose as high as the 91.40 level before meeting resistance and dropping back lower, now trading around 91.15. $USD https://t.co/9kXnkLUlCZ
  • Mid-Week Market Update- Technical Outlook for $USD Majors, #Gold & #Oil and more! -(Webinar Archive)- https://t.co/lsXyrQRp6I
  • Commodities Update: As of 16:00, these are your best and worst performers based on the London trading schedule: Silver: 2.35% Gold: 0.73% Oil - US Crude: -1.12% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/LpTHYUKJLx
  • Seems the WallStreetBets crowd is talking about the 'typical' top speculative listings - top 2 is the $SPY S&P 500 ETF and the Netflix ($NFLX) post earnings. And number 3 is the Reddit board OG GameStop https://t.co/1BjEVbMDYC
  • Myth or fact? One thing is for sure, there are a lot of misconceptions about trading. Knowing the difference between common trading myths and the reality is essential to long-term success. Find out about these 'myths' here: https://t.co/EDvQdHfIPm https://t.co/oDzWIyV6AP
  • Forex Update: As of 16:00, these are your best and worst performers based on the London trading schedule: 🇨🇦CAD: 0.98% 🇳🇿NZD: 0.52% 🇦🇺AUD: 0.35% 🇬🇧GBP: -0.03% 🇪🇺EUR: -0.05% 🇨🇭CHF: -0.13% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/8H7ly6RTkq
Euro Under Fire as ECB Preps for Massive Balance Sheet Expansion

Euro Under Fire as ECB Preps for Massive Balance Sheet Expansion

Christopher Vecchio, CFA, Senior Strategist
Euro Under Fire as ECB Preps for Massive Balance Sheet Expansion

Fundamental Forecast for Euro:Neutral

- EURUSD technicals turned more bearish after the ECB meeting, the US NFP release on Friday.

- December forex seasonality has favored a weaker EURUSD in the QE era.

- Have a bullish (or bearish) bias on the Euro, but don’t know which pair to use? Use a Euro currency basket.

The European Central Bank’s dovish tone at its final policy meeting of the year has paved way for speculation anew on forthcoming easing measures, sinking EURUSD to fresh yearly lows. The 18-member currency slipped by -1.36% against the US Dollar, closing the week at $1.2283, but not before dipping as low as $1.2271 in the process. The ECB didn’t need to employ a sovereign QE program like some were expecting in order to keep pressure on the Euro. Instead, as we discussed last week, the ECB is signaling it has other intentions.

The stated goal of ECB policy is to ensure price stability, but under the pretense of its current measures (interest rate corridor in negative territory, TLTROs, ABS-program), it is failing miserably in its attempts to lift inflation. The 5Y5Y inflation swaps, ECB President Draghi’s purported favorite market-measure of inflation, rebounded to 1.608% on Friday, after hitting as low as 1.429% on December 1. The ECB’s stated medium-term inflation target is ‘at or near +2%.’

We’ve heard several times over the past few weeks that prominent ECB officials, including President Mario Draghi and Vice President Vitor Constancio, believe that expanding the ECB’s balance sheet back to its early-2012 levels will help revive the region’s plummeting inflation expectations and flagging credit growth.

Acknowledging that the ECB has fallen short of its target, one might consider why this meeting lacked action. While market participants called for a Fed-styled, sovereign QE program, the ECB recognized it would be ineffective given the fact that peripheral yields have plummeted across the region. The ECB may have offered tacit acknowledgement that the central bank is moving closer to a QE program, but that doesn’t mean it has to be a sovereign QE program. A sovereign QE program would be just one possible route to achieve the desired end goal of lifting the balance sheet back towards its early-2012 levels.

What was at risk at the past meeting was the ECB’s credibility. With the second TLTRO allotment results due to be revealed on December 11, any new QE program ahead of the release – which wouldn’t have had support of a unanimous Governing Council – would: a) be equivalent to admitting the previous measures aren’t working; and b) have reset the clock on the ability to act in the future. By waiting until at least January, the ECB’s doves can avoid scuttling future ambitions as hawks demand additional time to let the measures work their way through the Euro-Zone.

If the current measures, the TLTROs and ABS-program, fail to begin lifting the ECB’s balance sheet back towards its early-2012 levels, (roughly €500B to €1 trillion greater than where it current stands), the ECB will assess whether or not it needs to engage in more aggressive easing policies in order to stoke growth and inflation as soon as the January 22 meeting.The last time a €1 trillion expansion happened, in the form of the LTROs in December 2011 and February 2012, the Euro suffered immensely against its major counterparts. This time, it’s not different. –CV

To receive reports from this analyst, sign up for Christopher’s distribution list.

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

DISCLOSURES