ECB in the frame

1

Idea of the Day

It was the euro taking a turn for the worse yesterday. Its vulnerability was already illustrated in the wake of the Fed decision as it was the weakest performer, but the weaker CPI for the Eurozone meant that expectations of action from the ECB before year end were enhanced. Expectations were already building for a new lending operation for the ECB in the early part of next year, but the CPI data increased the view that we could see the ECB cut its benchmark rate before the year is out. This could mean that we are in for a period of reversal on the euro, especially on some of the crosses such as EURJPY. The game has shifted as we head into next week’s ECB policy meeting and the one thing to remember is that the currency ECB President has been a lot more active than the last one when it comes to changing policy when needed.

20131101 Table

Data/Event Risks

GBP: There was no stopping the manufacturing PMI numbers earlier in the year, rising every month from March to August. This trend was reversed in the September data, with expectations for a marginal fall in today’s numbers from 56.7 to 56.4.

USD: The ISM manufacturing data will be one of the first reads of economic sentiment during October’s shutdown. Markets expect a fall from 56.2 to 55.0, but volatility risks are greater than usual for this release.

Latest FX News

JPY: The yen the outperforming in the overnight session, USDJPY dipping briefly below the 98.00 level, but no real fundamental trigger to the move. It did allow for a further push lower on EURJPY below the 133.00 level.

EUR: Slipping as expectations of ECB action increase, although cracks were already appearing before the weaker than expected inflation data, which showed the headline rate at 0.7%.

AUD: The Aussie finding a base around the 0.9450 – 0.9500 area in the latter half of the week, helped by stronger data yesterday. Overnight, Q3 PPI rose 1.3% according to data released overnight which also served to support the currency.

Further reading:

EUR/USD Nov. 1 – Free fall continues on rate cut expectations

EUR/USD getting close to critical uptrend support – bounce or breakdown?

Get the 5 most predictable currency pairs

About Author

Forex Broker FxPro is an international Forex Broker. FxPro is an award-winning online broker, offering CFDs on forex, futures, indices, shares, spot metals and energies, serving clients in more than 150 countries worldwide. FxPro offers execution with no-dealing-desk intervention and maintains a client-centric business model that puts customer needs at the forefront of our operations. Our acquisition of leading spot FX aggregator, Quotix, enables us to offer access to a deep pool of liquidity, as well as top-class order-matching and some of the most competitive spreads in the market. FxPro is one of only few brokers offering Negative Balance Protection, ensuring that clients cannot lose more than their overall investment. FxPro UK Limited is authorised and regulated by the Financial Conduct Authority (registration number: 509956). FxPro Financial Services Limited is authorised and regulated by the Cyprus Securities and Exchange Commission (licence number: 078/07) and by the South Africa Financial Services Board (authorisation number 45052). Risk Warning: Trading CFDs involves significant risk of loss.

1 Comment

  1. Pingback: ECB in the frame | Forex Crunch | Forex Kompass Indonesia