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GBP:  Low risk seen at BoE meeting (last of current governor King). Three members have been voting for more QE for past four meetings, but data has improved modestly, so would be surprising if this minority increase. Decrease is looking more likely, but we have to wait for 2 weeks for confirmation or otherwise on this.

EUR:  The ECB meeting always brings pretty strong event risk, more from the press conference than the decision itself. Focus remains on the potential for a negative deposit rate. Last month, the euro lost more than 1 big figure on the back of more positive (although still tentative) noises from the President on the possibility of such a move.   This underlines the degree to which it would be seen as negative for the currency.

More:  4 Scenarios for the ECB: Negative rate to be put on hold?

Update:  ECB leaves all rates unchanged, EUR/USD higher.

Follow a live blog of the ECB press conference

Idea of the Day

The focus will be on whether the ECB announces a negative deposit rate today, something which would knock the euro if seen. The risks for this meeting are probably still low, but there was certainly evidence during last month’s post meeting press conference that the ECB were warming to the idea, or at least were not as wary of it as before.

The deposit rate is where banks ‘park’ funds at the ECB on an overnight basis, if they choose not to lend to other banks. The issue of a negative rate (currently it is zero) is shrouded in technical complications, but the ECB has had time to think these through. Furthermore, the amount which banks are depositing in the deposit facility has been falling steadily for most of this year, so in theory (again, there are complications) the impact of a negative rate should be less than if it was introduced earlier in the year.

The risk for the euro today is more from talk rather than action.

More:  ECB: Decent chance of a negative deposit rate, just not in June

Latest FX News

USD:   The dollar has softened further overnight on the basis that the data is not going the way needed to risk a ‘tapering’ of bond purchases as early as this month. Payrolls the major focus for tomorrow.

AUD:  The Aussie has been well and truly hammered over the past 24 hours, down nearly 1.5% and unable to benefit from the weaker dollar tone seen during the Asian session. The price action is indicative of further erosion of confidence in the Aussie from longer-term investors.   New low for the year for AUDUSD made at 0.9435.

EUR:  Benefitting from slightly softer dollar tone together with the hammering being given to the Aussie and less so the kiwi.   EURUSD has made a 4 week high above the 1.31 level in late Asia trade.

GBP: GBPUSD above the 1.54 level in Asia trade. The pound has been relatively buoyant over the past week on better than expected data, but it’s not in the mood to run away with itself.

Further reading:  EUR/USD: Trading the US Non-Farm Employment Change