Forex Flash: Majors upbeat overnight – BNZ
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EUR/USD
FXstreet.com (Barcelona) - Mike Jones, Strategist at BNZ, notes that improved European economic news, optimism over the US fiscal cliff and the usual pre-FOMC ebullience has underpinned a more upbeat tone overnight.
He comments buoyant risk sentiment has seen equity markets rally, benchmark yields rise, and the 'safe-haven' USD and JPY under perform. EUR and NZD have led the way in dragging majors higher. Jones notes that a surprise jump in the ZEW survey has helped to assuage fears of the German economy entering into recession early next year.
On the other side of the Atlantic, investors have taken heart from suggestions that progress is being made on the fiscal cliff. Emerging evidence that some senior Republicans appear open to ceding some ground on Democrat aims to raise taxes on the wealthiest from 29.6% to 35% may have played a contributory role.
He sees that the expectation of more Fed-easing has likely further fuelled the rally. Fed-watchers have pointed out that US equity markets have rallied ahead of five of the seven FOMC meetings this year. Jones expects Operation Twist to be replaced with between $25-45bln of outright Treasury purchases per month alongside current MBS purchases.
He finishes by writing, "Additional Fed easing (some are calling it QE4), combined with a more general flight back into risk assets should ensure gradual USD weakness continues with EURUSD grinding back up into a 1.3000-3200 range in coming sessions.
He comments buoyant risk sentiment has seen equity markets rally, benchmark yields rise, and the 'safe-haven' USD and JPY under perform. EUR and NZD have led the way in dragging majors higher. Jones notes that a surprise jump in the ZEW survey has helped to assuage fears of the German economy entering into recession early next year.
On the other side of the Atlantic, investors have taken heart from suggestions that progress is being made on the fiscal cliff. Emerging evidence that some senior Republicans appear open to ceding some ground on Democrat aims to raise taxes on the wealthiest from 29.6% to 35% may have played a contributory role.
He sees that the expectation of more Fed-easing has likely further fuelled the rally. Fed-watchers have pointed out that US equity markets have rallied ahead of five of the seven FOMC meetings this year. Jones expects Operation Twist to be replaced with between $25-45bln of outright Treasury purchases per month alongside current MBS purchases.
He finishes by writing, "Additional Fed easing (some are calling it QE4), combined with a more general flight back into risk assets should ensure gradual USD weakness continues with EURUSD grinding back up into a 1.3000-3200 range in coming sessions.
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