Quantitative easing dates with the nonfarm payrolls – Deutsche Bank

By FXStreet FXStreet (Delhi) – Alan Ruskin, Macro strategist at Deutsche Bank, suggests that ironically, Mario Draghi’s biggest problem is his own credibility. It is Draghi’s past ability to leapfrog expectations that has itself elevated expectations to extreme heights.

Key Quotes

• “Given so many instruments, it is the broader impressions from the press conference that will ultimately decide whether the ECB has managed to match or exceed elevated expectations.

• The market needs to come away with the impression that Draghi has the tools to do ‘whatever it takes’ to lift inflation back to target – a full embrace of ‘QE whatever it takes’.

• Fears of getting carried away with Draghi’s credibility, coupled with large scale short EUR pre-positioning explains why the FX market is concerned about an upside squeeze in EUR/USD. 25 delta risk reversals for the day on EUR/USD, have been bid for top side to the tune of 4 to 5 vols.

• The one day vols have been consistent with a daily EUR/USD range of ~290 pips, leaving the current downside straddle breakeven very close to the cycle low at 1.0460 which looks very well protected for now, not least because the unpredictable US payrolls number comes up …read more

Source:: FX Street