ECB To Ease In March, Fed On Hold Till September,


Does EUR/USD have more room to rise? It took a break for now, but could certainly resume its upward move. Here is the explanation from Danske:

Here is their view, courtesy of eFXnews:

We now expect the ECB to accompany a 10bp rate cut in March with the introduction of a two-tier deposit rate system and front-loaded QE. Specifically, we believe the ECB will introduce a maximum reserve requirement, where liquidity is placed at a rate above the deposit rate. In addition, we believe it will increase monthly purchases to EUR80bn between March-May 2016 and potentially longer, but the total QE size should be unchanged. We expect the ECB to react to collapsing inflation expectations rather than market stress. The two-tier deposit rate system should open the door for more rate cuts while at the same time reducing costs in the banking sector.

Crisis happan every 2 3 years on average

We also expect the Fed to postpone the next Fed rate hike to September, as we believe the tighter financial conditions will result in a pause. As such, the Fed is likely to remain dovish in coming months but this is also already what markets are expecting with the first full 25bp Fed rate hike only being priced in by mid-2018.

Near term, we expect EUR/USD to range trade as high risk aversion counterweighs relative interest rates. Medium term, we maintain our long-held view that EUR/USD will head substantially higher due to a range of fundamental factors

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Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned the significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.

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