3 Dec 2014
EUR/USD under pressure – TDS
FXStreet (Barcelona) - The TD Securities Team notes that EUR/USD is under pressure and anticipate the pair to trade defensively ahead of the ECB meeting.
Key Quotes
“EURUSD is heading into the end of the year on a weak note—note seasonal swoon for the USD is evident at this point but that is little wonder, considering the headwinds facing the single currency.”
“Firstly, Fed officials are sounding confident about the economic outlook and yields in the belly and long end of the US curve are responding. Secondly, this morning’s Eurozone PMI data revisions suggest that the block continues to struggle, raising expectations that the ECB will have to come up with more aggressive easing action. In this respect, the EUR will trade defensively ahead of Thursday's ECB meeting where markets will look for President Draghi to signal a willingness to do more—his late November speech suggested a need to move quickly though we do not expect significant new policy steps just yet.”
“One wrinkle here is that the ECB moves to a 6-week meeting schedule in 2015 so from here, the next opportunity for the ECB to act will not be until late January; that may shift the balance of risks to doing something sooner rather than later very slightly (given Draghi’s sense of urgency)—though we still favour “later”.“
“No significant, new QE steps may see the EUR rally modestly Thursday but, with US jobs data just around the corner, a good ADP report today likely means little more upside potential than the low 1.24s for EURUSD from here. Look to sell modest EUR rallies near-term.”
Key Quotes
“EURUSD is heading into the end of the year on a weak note—note seasonal swoon for the USD is evident at this point but that is little wonder, considering the headwinds facing the single currency.”
“Firstly, Fed officials are sounding confident about the economic outlook and yields in the belly and long end of the US curve are responding. Secondly, this morning’s Eurozone PMI data revisions suggest that the block continues to struggle, raising expectations that the ECB will have to come up with more aggressive easing action. In this respect, the EUR will trade defensively ahead of Thursday's ECB meeting where markets will look for President Draghi to signal a willingness to do more—his late November speech suggested a need to move quickly though we do not expect significant new policy steps just yet.”
“One wrinkle here is that the ECB moves to a 6-week meeting schedule in 2015 so from here, the next opportunity for the ECB to act will not be until late January; that may shift the balance of risks to doing something sooner rather than later very slightly (given Draghi’s sense of urgency)—though we still favour “later”.“
“No significant, new QE steps may see the EUR rally modestly Thursday but, with US jobs data just around the corner, a good ADP report today likely means little more upside potential than the low 1.24s for EURUSD from here. Look to sell modest EUR rallies near-term.”