8 Nov 2013
Flash: ECB was an unsurprising surprise - Societe Generale
FXstreet.com (London) - Kit Juckes, Head of Currency Strategy at Societe Generale explained the ECB sprang an unsurprising surprise!
Key Quotes:
“Markets were shocked by the ECB's decision to cut rates despite the fact that the vast majority of analysts and economists, traders and investors, expected a cut in December. So we learn that under Mario Draghi's leadership, the Council doesn't feel the need to wait for a new set of forecasts to get on with the task in hand”.
“Inflation is lower, further from target and rates needed to be cut. For the record, 10yr Bund yields and 2yr Euro swap rates are down a massive 4bp from Wednesday evening's levels”.
“The Euro has fallen 0.7%, Bund yields, two year swap rates and the Euro are all higher than they were at the start of the year. And that is why I see this latest move by the ECB not as a one-off or the last step in an easing cycle, but potentially the start of a new phase of monetary accommodation”.
“My market conclusions follow - this is ‘not good' for the Euro, but EUR/USD needs a change in Fed policy or least policy bias before it moves decisively lower. I spent all year ‘wanting' to sell EUR/USD between 1.35 and 1.40 and that looks like the right thing to have wanted to do! Shame all I'm left with is this grotty EUR/GBP short. I hope your trading execution is less inept than mine!”.
Key Quotes:
“Markets were shocked by the ECB's decision to cut rates despite the fact that the vast majority of analysts and economists, traders and investors, expected a cut in December. So we learn that under Mario Draghi's leadership, the Council doesn't feel the need to wait for a new set of forecasts to get on with the task in hand”.
“Inflation is lower, further from target and rates needed to be cut. For the record, 10yr Bund yields and 2yr Euro swap rates are down a massive 4bp from Wednesday evening's levels”.
“The Euro has fallen 0.7%, Bund yields, two year swap rates and the Euro are all higher than they were at the start of the year. And that is why I see this latest move by the ECB not as a one-off or the last step in an easing cycle, but potentially the start of a new phase of monetary accommodation”.
“My market conclusions follow - this is ‘not good' for the Euro, but EUR/USD needs a change in Fed policy or least policy bias before it moves decisively lower. I spent all year ‘wanting' to sell EUR/USD between 1.35 and 1.40 and that looks like the right thing to have wanted to do! Shame all I'm left with is this grotty EUR/GBP short. I hope your trading execution is less inept than mine!”.