Forex Crunch » Quantitative Easing

Lose-Lose Situation for the Euro

Yohay — Tue, 13 Dec 2011 18:05:19 +0000

If the ECB continues its policy regarding bond buying, the euro is set to fall. If it launches QE, it will likely follow the path of the greenback after QE2, with one specific euro cross set to gain.

Christopher Vecchio of DailyFX analyzes the current situation of the euro, the bright side for the pound in the aftermath of the EU Summit, the low likelihood of more US QE, how the Canadian dollar will react to rising tensions around Iran, and more in the interview below.

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Draghi Announces Easy Three Year Bank Loans, No QE – EUR/USD Falls

Yohay — Thu, 08 Dec 2011 13:03:23 +0000

The president of the ECB, Mario Draghi, is discussing the rate cut just announced and also declared new measures to help banks: 2 three year LTROs, lower grade assets as collateral, and a cut in the reserve ratio. Anything to help banks in the current strain. EUR/USD rises but then turns back after Draghi answered NO to the question about bond buying.

Draghi also lowered forecasts, with a good chance of a recession in 2012. The rejection of bond buys and also of a circular IMF / EFSF solution sends EUR/USD even lower. “Must respect treaty”. EUR/USD losing support. Live updates from the press conference in this post.

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EUR/USD Dec. 8 – All Eyes on Draghi

Yohay — Thu, 08 Dec 2011 08:24:11 +0000

Euro dollar is trading a big higher in a very limited range. All eyes are on the ECB rate decision. Mario Draghi is widely expected to cut the rates to 1%, but this isn’t 100% certain, and there are quite a few other policy options that could be introduced. This is a very busy day before the critical EU Summit.

Here’s a quick update on technicals, fundamentals and what’s going on in the markets.

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Why the Swap Cut Rally Will Likely Be Short Lived

Yohay — Wed, 30 Nov 2011 17:09:59 +0000

The Federal Reserve and the ECB, together with 4 other central banks, decided to lower rates on dollar swaps by 50 basis points. As mentioned in recent days, the euro/dollar swap has reached levels last seen in 2008.

This coordinated action had a strong impact on currencies, and sent EUR/USD back to the range seen last week. This range lasted until the failed German bond auction. How long will this rally last? Looking at the last central bank cooperation, the answer is: not too much. The ECB hasn’t used its real ammunition yet.

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The US economy is in no state to support the global community

Yohay — Wed, 30 Nov 2011 10:53:22 +0000

While recent indicators have been positive, the recent crisis in Europe is too strong for the world’s No. 1 economy. In the euro-zone, a rate cut seems likely, at least for easing the pressure for quantitative easing.

John Kicklighter of DailyFX discusses the crisis, the US economy, the status of safe haven currencies and more in the interview below.

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Cracks in ECB Sterilization – QE One Step Closer

Yohay — Tue, 29 Nov 2011 13:30:00 +0000

The European Central Bank failed to sterilize all the bond buying made through the SMP program. As the central bank increased its bond buys by another 8.6 billion euros, it couldn’t drain all the money out of the markets, raising the money supply. This is not the first time that this happens and wouldn’t raise concern if this would have happened earlier.

But things are different now: bond buying has accelerated in recent weeks and the total sum already passed the €200 billion mark. And while the bond buying accelerated, this couldn’t stop the rise in Spanish and Italian yields. These high yields were also reflected in the primary market: recent auctions in Italy and Spain resulted in very high yields, especially for short term lending.

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EUR/USD Nov. 18 – Range Bound as Limited ECB Buying Maintains Stability

Yohay — Fri, 18 Nov 2011 10:57:43 +0000

Euro dollar challenged the top border of the range without success. Greece revised its deficit figures once again. On the other hand, Italian yields are kept under 7%, courtesy of the ECB. Will the central bank step up its efforts? The crisis is at the foot of German bonds now. As no significant US figures are released today, the crisis will have all the stage for itself at the end of this week.

Here’s a quick update on technicals, fundamentals and what’s going on in the markets.

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Euro to Crash When German Yields Join the Party

Yohay — Fri, 18 Nov 2011 10:22:05 +0000

The debt crisis weakened the euro, but the drops aren’t so significant, and are puzzling many. Well, most of the moves in the bond markets have been within the zone: from the periphery to the core, to the benchmark. As the wolves are closing in, also the German benchmark is in danger of being broken.

And that’s the moment that EUR/USD will plunge. There are already some signs of this kind of movement. Will the ECB step up its efforts?

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A calm before the storm

Yohay — Thu, 17 Nov 2011 09:14:13 +0000

After Tuesday’s horror show, Europe’s markets were eerily calm yesterday, but frankly it seemed nothing more than an uneasy quiet before the next thunder-cloud arrives. Talk of the ECB stepping up the pace of secondary market purchases helped steady frayed nerves, but even so it is a long way short of the buying power that is required to soak up the forced sellers.

More and more commentators are pushing the ECB to consider unlimited unsterilised bond purchases (aka QE), but both Germany and various members from the ECB reject this idea, arguing that it would massively compromise the ECB’s credibility.

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GBP/USD Crashes as Extra 75 billion of QE Announced

Yohay — Thu, 06 Oct 2011 11:01:26 +0000

GBP/USD is now plunging as the British Monetary Policy Committee decided to embark on more QE – Big time. An addition of 75 billion pounds to a total of 275 billion is at the high end of expectations, and at a low end for the pound. The interest rate remained at 0.50%, as expected.

GBP/USD plunged by almost 200 pips for the initial move, and is now bouncing back. It is currently holding above the lows of 1.5235 seen at the end of September. The swing low level of 1.5284, touched only for a short while, is the lowest level in more than a year.

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