21 Jan 2015
ECB and subsequent volatility on its way - TDS
FXStreet (Guatemala) - Analysts at TD Securities explained that rates markets are in for a significant amount of volatility on the day, and that could bleed into FX markets. Fortunately, FX markets are much simpler.
Key Quotes:
"For FX, the question is simply how much flow can I assume will be crossing the border in the coming years, at what pace, and what sort of scope do I have to price in speculative positions on more QE to come in the future?"
"So €500bn in new bond buying over 12 months may be better than a slightly larger commitment over two years, because the latter suggests 2016 is a fait accompli while the former lets the animal spirits take hold and offset further macro disappointment by pricing in more QE."
"But it is unlikely Draghi on the day explicitly takes a shot at EUR. Given the contentious nature of this decision, he will let their balance sheet do the talking rather than confirm fears that the ECB has a laser focus on devaluing the euro."
Key Quotes:
"For FX, the question is simply how much flow can I assume will be crossing the border in the coming years, at what pace, and what sort of scope do I have to price in speculative positions on more QE to come in the future?"
"So €500bn in new bond buying over 12 months may be better than a slightly larger commitment over two years, because the latter suggests 2016 is a fait accompli while the former lets the animal spirits take hold and offset further macro disappointment by pricing in more QE."
"But it is unlikely Draghi on the day explicitly takes a shot at EUR. Given the contentious nature of this decision, he will let their balance sheet do the talking rather than confirm fears that the ECB has a laser focus on devaluing the euro."