ECB scepticism explains EUR/USD resilience – MUFG

By FXStreet Derek Halpenny, European Head of GMR at MUFG, suggests that now with the jobs report behind us, the markets will very much be focused on the ECB monetary policy meeting on Thursday.

Key Quotes

“EUR bears are no doubt approaching this event with a high degree of trepidation! The 4.3% intra-day high-low move on 3rd December remains one of the largest up-moves since the EUR began trading in 1999. In addition to the disappointment in December, we believe market participants are also wary of aggressively shorting the euro given what happened to the yen following the BOJ easing on 29th January. That has fuelled speculation that central banks are now unable to influence foreign exchange given the increasing portion of the debt market that is trading with a negative yield.

That’s certainly understandable and we do find it difficult to envisage a major drop in EUR/USD this week just on the back of ECB action. A 10bp rate cut, a EUR 10bn per month increase in asset buying and an extension in the timeline of QE by a further six months to September 2017 are all steps that while impressive would not hugely surprise the markets.

But even beyond what the ECB does, …read more

Source:: FX Street