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
EUR/USD
Bullish
Oil - US Crude
Bullish
Wall Street
Bullish
Gold
Mixed
GBP/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
USD/JPY
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
More View more
Real Time News
  • The US Dollar weakened against ASEAN currencies like the Singapore Dollar, Malaysian Ringgit, Indonesian Rupiah and Philippine Peso. Ahead, Chinese GDP and US retail sales are eyed. Get your market update from @ddubrovskyFX here:https://t.co/fy366LmjDK https://t.co/4wFFibsNz2
  • Here is an atypical cross for those that just focus on the majors, but nevertheless worth following. $GBPNZD's 10-day ATR is at an extreme low level (lowest since Aug 2018). Suggests a higher risk of a break in the future https://t.co/gguiZrXUMW
  • Join @ddubrovskyFX 's #webinar at 8:00 PM ET/12:00 AM GMT to find out what information you can gain from knowing what other traders are buying or selling. Register here: https://t.co/Bb3CTCTm44 https://t.co/OtwK8uJohe
  • 🇰🇷 Unemployment Rate (JUN) Actual: 4.3% Previous: 4.5% https://www.dailyfx.com/economic-calendar#2020-07-14
  • Heads Up:🇰🇷 Unemployment Rate (JUN) due at 23:00 GMT (15min) Previous: 4.5% https://www.dailyfx.com/economic-calendar#2020-07-14
  • The ASX 200 stock index looks poised for a reversal at key resistance as Australia-China trade tensions continue to escalate. Get your #ASX 200 market update from @DanielGMoss here:https://t.co/wiP4yPITa6 https://t.co/Zgc7ATjvbT
  • RT @DanielGMoss: Broad risk-on tilt seen early in #APAC trade The haven-associated $USD and $JPY plunging The trade-sensitive $AUDUSD an…
  • Market snapshot: US equity futures pointing higher early into Asia trade
  • Trump Press Briefing: - We will be ready to distribute vaccine when its ready. We are seeing promising signs.
  • President Trump signs Hong Kong sanctions bill targeting banks and ends special status agreement. "Hong Kong will now be treated the same as mainland China" $USDHKD
EURUSD – Looking Past “Taper” Speculation at Fed vs. ECB Policy Trends

EURUSD – Looking Past “Taper” Speculation at Fed vs. ECB Policy Trends

2013-12-31 18:20:00
Ilya Spivak, Currency Strategist,
Share:

Talking Points:

  • Fed may look to scale back QE at some point in 2014
  • ECB likely to continue easing monetary policy in the year ahead
  • Will look for technical confirmation to enter short EUR/USD

The markets have been preoccupied with the timeline for the Federal Reserve’s “tapering” of its QE3 asset purchases since the central bank unexpectedly opted to keep the stimulus program at full size in September. While this process is likely to continue feeding short-term volatility, the overall picture is less erratic. On balance, it seems fair to assume the Fed will look to scale back QE at some point in 2014. In relative terms, that represents a hawkish shift along the monetary policy spectrum.

This stands in stark contrast with the trajectory of ECB monetary policy. Eurozone inflation has trended lower for two years, prompting Mario Draghi and company to cut interest rates by 25bps in November after year-on-year CPI slipped to 0.7 percent. This drove the Euro down at first but the single currency quickly erased the drop. This makes sense: cutting the benchmark rate from 50 to 25 basis points means little when the market rate for borrowing Euros (EONIA) has averaged around 8bps this year.

Investors’ inflation expectations priced into bond yields continued to fall after November’s rate cut. Economists agree: a survey of forecasters polled by Bloomberg shows the outlook for 2014 CPI inflation was marked down from 1.5 to 1.3 percent in mid-November, after that month’s ECB meeting. November’s PMI data showed region-wide output prices across the industry spectrum fell for the 20th consecutive month, suggesting calls for lower inflation are rooted in real-economy developments.

EURUSD_Looking_Past_Taper_Speculation_at_Fed_vs_ECB_Policy_Trends_body_Picture_3.png, EURUSD – Looking Past “Taper” Speculation at Fed vs. ECB Policy Trends

All told, this means the ECB is likely to continue easing monetary policy in the year ahead. Non-standard options like negative deposit rates, another round of LTROs or a direct-lending program similar to the BOE’s FLS scheme are possible alternatives. Whichever form said easing takes however, the bottom line remains: the ECB stands to become more dovish while the Fed is positioned to move in the opposite direction, making for a bearish outlook on EUR/USD. I will look for technical confirmation of reversal as prices test channel resistance set from April 2008 to enter short, initially targeting 1.3148 (23.6% Fibonacci expansion level).

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

DISCLOSURES

News & Analysis at your fingertips.