9 Jul 2013
Flash: ECB unlikely to change interest rates anytime soon – ANZ
FXstreet.com (New York) - “It is not uncommon now to hear predictions of a move down to 1.20 in EUR/USD.” notes Brian Martin at ANZ.
However, whether or not the ECB will actually cut interest rates remains to be seen. Should the green shoots of recovery in the business cycle continue to unfold, then there would be little reason for them to cut.
Ultimately, the fact that any tightening in policy is very distant means that interest rates will stay low for a very long time. Anchoring interest rate expectations is key. After all, the BoE's Bank Rate has been at 0.5% for four years. “The market is taking this new communication policy from the ECB as a green light to sell the EUR. A period of further correction on some key EUR and GBP crosses cannot be ruled out i.e. vs AUD, NZD, JPY etc.” Martin adds.
However, whether or not the ECB will actually cut interest rates remains to be seen. Should the green shoots of recovery in the business cycle continue to unfold, then there would be little reason for them to cut.
Ultimately, the fact that any tightening in policy is very distant means that interest rates will stay low for a very long time. Anchoring interest rate expectations is key. After all, the BoE's Bank Rate has been at 0.5% for four years. “The market is taking this new communication policy from the ECB as a green light to sell the EUR. A period of further correction on some key EUR and GBP crosses cannot be ruled out i.e. vs AUD, NZD, JPY etc.” Martin adds.