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Forex pairs in this Article » EUR/USD, GBP/USD
FXStreet (Barcelona) - Sverre Holbelk, Senior Analyst at Danske Bank notes that following the lack of action from the ECB yesterday and Draghi failing to acknowledge that deflation could become an issue in the euro-zone, his call for EUR/USD downside has certainly lost an important argument from the EUR side.

Key Quotes

“While there is still a chance of a rate cut later in the spring, the ECB seems much less determined to move closer to (and not to say below) the zero lower bound than we previously thought. This highlights that the ECB is not - after all - entirely symmetric in its approach to price stability: in the current situation with a supply-driven drop in inflation and rates near the zero level, it will apparently take a lot to foster more easing.”

“That is not to say that EUR/USD should not head lower from here: we still have underlying USD support from the Fed. However, this will imply only a gradual move lower in the cross as taper continues and in the near term softer US data could drag in the other direction.”

“First test of the latter will of course be US non-farm payrolls later today. Regarding GBP, the next focal point will be the BoE Inflation Report on 12 February after BoE kept rates unchanged and did not issue a statement yesterday; the BoE might by then try to convince the market that despite falling unemployment the MPC is not in a hurry to hike rates.”

“Overnight the RBA released its quarterly Statement on Monetary Policy, which turned out a little softer than feared and AUD/USD gained slightly; we think the cross may take a breather from the latest sell-off as the RBA has turned notably less accommodative of further AUD downside. Finally, the Scandies could be in for some action today with industrial production figures out across the region.”
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