EUR/USD shot higher following Draghi’s calm message in the press conference. One of the reasons for this rise is the lack of urgency to front load bond buying.
The team at BNP Paribas talks about fading the bond related rally:
Here is their view, courtesy of eFXnews:
BNP Paribas favors fading the recent rise in the EUR noticing that the ECB delivered overall a dovish message, with President Draghi reaffirming the central bank’s firm intention to implement its full program of asset purchases despite recent improvement in CPI and noting recent re-weakening of data.
“However, bond markets appear to have been hoping for some reassurance that the central bank would act to address recent increases in volatility in fixed income. Draghi’s message that markets would need to get accustomed to a higher level of volatility and failing to signal that the ECB would address liquidity mismatches discussed have been the drivers of higher Bund yields and the EUR’s move higher,” BNPP adds.
“Coupled with EURUSD no longer appearing cheap according to STEER and short EUR positioning having been reduced substantially, the EUR’s latest recovery as a good opportunity to re-enter EUR shorts,” BNPP advises
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