22 Jan 2015
EUR a “sell on the fact”? – Rabobank
FXStreet (Barcelona) - Jane Foley, Senior Currency Strategist at Rabobank, believes that the real test of ECB today could be its ability to restrict strengthening in the value of the EUR and steer the market away from the ‘buy on rumour – sell on the fact’ reaction.
Key Quotes
“By whipping the markets into a frenzy of anticipation of QE, ECB President Draghi has succeeded in significantly undermining the value of the EUR over the last few weeks. Of course, a number of other factors have contributed to the EUR’s recent slide. These include the ECB’s two rate cuts in June and September 2014, the stronger tone of the USD during the latter half of last year and last week’s decision by the SNB to step away from its EUR/CHF1.20 floor – this action removed a large EUR buyer from the market.”
“We have been arguing for some time that the real aim of QE in the Eurozone could be to push down the value of the EUR; long-term interest rates across the Eurozone are already at rock-bottom levels suggesting that another incremental fall in rates is unlikely to spark an avalanche of growth and inflation.”
“Therefore the real test of the ECB today could be its ability to steer the market away from a ‘buy on the rumour – sell on the fact’ reaction which could result in a strengthening in the value of the EUR.“
Key Quotes
“By whipping the markets into a frenzy of anticipation of QE, ECB President Draghi has succeeded in significantly undermining the value of the EUR over the last few weeks. Of course, a number of other factors have contributed to the EUR’s recent slide. These include the ECB’s two rate cuts in June and September 2014, the stronger tone of the USD during the latter half of last year and last week’s decision by the SNB to step away from its EUR/CHF1.20 floor – this action removed a large EUR buyer from the market.”
“We have been arguing for some time that the real aim of QE in the Eurozone could be to push down the value of the EUR; long-term interest rates across the Eurozone are already at rock-bottom levels suggesting that another incremental fall in rates is unlikely to spark an avalanche of growth and inflation.”
“Therefore the real test of the ECB today could be its ability to steer the market away from a ‘buy on the rumour – sell on the fact’ reaction which could result in a strengthening in the value of the EUR.“