6 Feb 2014
Flash: EUR weakens on ECB cut expectations - BTMU
FXStreet (Córdoba) - Lee Hardman, FX Analyst at the Bank of Tokyo Mitsubishi UFJ notes that the Euro has weakned on expectations that the ECB may cut rates this afternoon.
Key Quotes
"The euro has weakened modestly heading into today’s ECB monetary policy meeting as the market has moved to discount a higher probability of the ECB easing monetary policy further. Those expectations have been fuelled by the lower than expected CPI report for January which revealed that the annual rate of headline inflation fell back to the October low of 0.7%. Recent reports too that the Bundesbank would support ending the ongoing sterilization of prior sovereign bond purchases made under the Securities Market Programme, which could potentially inject around EUR175 billion of liquidity, have also weighed modestly upon the euro."
"It is a close call as to whether the ECB feels there is compelling evidence to ease policy again as soon as today. On the positive side the latest PMI surveys highlighted that economic recovery in the euro-zone has likely continued to strengthen posing upside risks to the ECB staff’s GDP forecast for 2014. Should the ECB disappoint investor expectations for further ECB easing today, the euro is likely to stage only a modest rebound as further easing still appears likely soon."
Key Quotes
"The euro has weakened modestly heading into today’s ECB monetary policy meeting as the market has moved to discount a higher probability of the ECB easing monetary policy further. Those expectations have been fuelled by the lower than expected CPI report for January which revealed that the annual rate of headline inflation fell back to the October low of 0.7%. Recent reports too that the Bundesbank would support ending the ongoing sterilization of prior sovereign bond purchases made under the Securities Market Programme, which could potentially inject around EUR175 billion of liquidity, have also weighed modestly upon the euro."
"It is a close call as to whether the ECB feels there is compelling evidence to ease policy again as soon as today. On the positive side the latest PMI surveys highlighted that economic recovery in the euro-zone has likely continued to strengthen posing upside risks to the ECB staff’s GDP forecast for 2014. Should the ECB disappoint investor expectations for further ECB easing today, the euro is likely to stage only a modest rebound as further easing still appears likely soon."