4 Feb 2014
Flash: EUR/USD should remain defensive ahead of ECB – TD Seciurities
FXStreet (Córdoba) - The TD Securities team expects the EUR/USD to retain a negative bias ahead of the European Central Bank decision on Thursday.
Key Quotes
"A Bloomberg report yesterday indicated that ECB President Draghi 'would only consider' ending the sterilization of bond purchases if he had the open support of the Bundesbank. The story is a little curious as the WSJ reported last week that the Bundesbank favoured an end to sterilization measures—so the key players all seem to be in favour of ending sterilization which would effectively leave more liquidity in the system".
"The reports seem to have driven a dip in short-term funding rates as markets start to anticipate additional liquidity sloshing around the system. It is debatable whether changes here would have that much impact on credit though and market speculation has rather focused on a cut in the refi rate as the ECB’s most likely response to the weaker run of data recently".
"We look for EUR/USD to retain a weaker bias ahead of the ECB (EURUSD capped below 1.3550/75) and target 1.3400".
Key Quotes
"A Bloomberg report yesterday indicated that ECB President Draghi 'would only consider' ending the sterilization of bond purchases if he had the open support of the Bundesbank. The story is a little curious as the WSJ reported last week that the Bundesbank favoured an end to sterilization measures—so the key players all seem to be in favour of ending sterilization which would effectively leave more liquidity in the system".
"The reports seem to have driven a dip in short-term funding rates as markets start to anticipate additional liquidity sloshing around the system. It is debatable whether changes here would have that much impact on credit though and market speculation has rather focused on a cut in the refi rate as the ECB’s most likely response to the weaker run of data recently".
"We look for EUR/USD to retain a weaker bias ahead of the ECB (EURUSD capped below 1.3550/75) and target 1.3400".