FXStreet (Guatemala) - Jane Foley, Senior Currency Strategist at Rabobank suggested that the ECB’s went further than expected yesterday with its list of monetary policy measures. However, by the close of the European trading session yesterday EUR/USD had already given back all of its post announcement losses.

Key Quotes:

“It seems that after years of extraordinary policy measures from various central banks the market has become sceptical as to their potential impact”.

“Huge volumes of QE by the Fed, the BoJ and the BoE have been successful at stoking stock markets gains and in many countries house prices inflation also”.

“However, slow growth and elevated levels of unemployment are still widespread across the developed world. The ECB’s new TLTRO may appear to be a reasonable concept to push cheap lending out to SMEs in the most stressed regions of the Eurozone”.

“However, it is not clear to what extent banks will want to lend into this very risky sector particularly in an environment in which they are paying back existing LTRO borrowing. All these scepticism sits on top of the fact that the dovish warnings of ECB President Draghi in the May meeting had convinced investors to take short EUR positions.”

“The ECB over the past few weeks has thus managed to engineer only a “buy of the rumours, sell on the fact” pattern for the EUR; it seems that the ECB’s ability to set the EUR into a new downtrend is still limited. Going forward there is reason to suspect that downside potential in EUR/USD could be evasive until USD bulls re-emerge in force”.

“Although there are signs that US growth is picking up after a horrible winter, economic data are not sufficiently strong to draw the bulls back to the market”.

“Adding to the torpor of the dollar is the perception that it would take a rocket to move the Fed from its present course of monetary policy. While the Fed is gradually reducing the size of its monthly assets purchases, it has persuaded the market that rates will remain at their all time long for a prolonged period. We expect that the Fed funds rate will not be raised until the very end of 2015 at the earliest and afterwards that the pace of tightening will be slow”.

Related Articles
  1. Professionals

    Illiquid Real Estate: Correlation Pros and Cons

    Stock and bond markets are moving more closely in tandem with each other. Is illiquid real estate the vaccine for this correlation?
  2. Professionals

    How to Manage Fixed Income as Interest Rates Rise

    A look at how to manage fixed income amid the specter of rising rates, correlation to stocks, client expectations and more.
  3. Mutual Funds & ETFs

    4 Mutual Funds Warren Buffet Would Buy

    Learn about four mutual funds Warren Buffett would invest and recommend to his trustee, and discover detailed analysis of these mutual funds.
  4. Mutual Funds & ETFs

    Passively Managed Vs. Actively Managed Mutual Funds: Which is Better?

    Learn about the differences between actively and passively managed mutual funds, and for which types of investors each management style is best suited.
  5. Economics

    Why the Euro Failed to Become the World's Reserve Currency

    Examine the current state of the U.S. dollar as the world's reserve currency; learn the major reasons why the euro has failed to replace it in that capacity.
  6. Professionals

    Want to Start Up an RIA? Expect These Hurdles

    RIAs looking to strike out on their own need to overcome and plan for a number of hurdles.
  7. Investing Basics

    Are ETFs the Best Way to Diversify with Bonds?

    Are bonds safe or risky right now? It depends on the type of bond and how you invest in them.
  8. Investing Basics

    How to Use Boring CDs to Diversify

    Markets are volatile and are in for more punishment. CDs can help investors earn some interest while they're waiting out the storm.
  9. Professionals

    How Legacy Planning Can Help Capture New Clients

    Don’t underestimate the importance of legacy planning with your clients—it could serve as method for you to create new business with any heirs.
  10. Investing Basics

    Top Tips for Diversifying with Exotic Currencies

    Is there an opportunity in exotic currencies right now, or are you safer sticking to the major ones?
  1. Are Cafeteria plans taxable?

    Whether the benefits you receive through your employer-sponsored cafeteria plan are taxable depends entirely on which benefits ... Read Full Answer >>
  2. Can mutual funds only hold stocks?

    There are some types of mutual funds, called stock funds or equity funds, which hold only stocks. However, there are a number ... Read Full Answer >>
  3. How do mutual funds compound interest?

    The magic of compound interest can be summed up as the concept of interest making interest. On the other hand, simple interest ... Read Full Answer >>
  4. Who decides to print money in Russia?

    The Central Bank of the Russian Federation (CBRF), like its peers in most countries, is the governmental entity responsible ... Read Full Answer >>
  5. Does working capital include prepaid expenses?

    The calculation for working capital includes any prepaid expenses that are due within one year, since such prepaid expenses ... Read Full Answer >>
  6. How do I read and analyze an income statement?

    The income statement, also known as the profit and loss (P&L) statement, is the financial statement that depicts the ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!