5 May 2014
EUR/USD continues to suffer volatility anaemia - Commerzbank
FXStreet (Córdoba) - Ulrich Leuchtmann, analyst at Commerzbank commented that if anything the ECB will only introduce measures that will have modest impacts on EUR exchange rates this week. As a result the EUR/USD is likely to remain in its current state of 'volatility anaemia'.
Key Quotes
"Euro zone inflation data came in only just below expectations. So it is unlikely to provide any reasons for the ECB to change its medium term inflation outlook – and therefore no reason for the European central bankers to purchase bonds."
"The ECB might tweak liquidity supply which is unlikely to have any major effects on the FX market though. As a result EUR/USD is likely to remain in its current state of 'volatility anaemia'."
"An FX market that increasingly receives its liquidity from institutional investors with short term horizons, rather than market makers, is increasingly struggling to appropriately factor in medium-term risks to current exchange rates. As a result, the FX market is not reflecting the impact on the current EUR/USD exchange rate resulting from the risk of a normalisation in US monetary policy, combined with the risk of an ECB characterised by the issue of whether it will become yet more expansionary."
"While the Fed is still purchasing bonds and the ECB does nothing but talk, the medium term downward risks are not having an effect...This is only likely to change once the FX market can no longer ignore the scenario of rising US interest rates, but that might well be some months off."
Key Quotes
"Euro zone inflation data came in only just below expectations. So it is unlikely to provide any reasons for the ECB to change its medium term inflation outlook – and therefore no reason for the European central bankers to purchase bonds."
"The ECB might tweak liquidity supply which is unlikely to have any major effects on the FX market though. As a result EUR/USD is likely to remain in its current state of 'volatility anaemia'."
"An FX market that increasingly receives its liquidity from institutional investors with short term horizons, rather than market makers, is increasingly struggling to appropriately factor in medium-term risks to current exchange rates. As a result, the FX market is not reflecting the impact on the current EUR/USD exchange rate resulting from the risk of a normalisation in US monetary policy, combined with the risk of an ECB characterised by the issue of whether it will become yet more expansionary."
"While the Fed is still purchasing bonds and the ECB does nothing but talk, the medium term downward risks are not having an effect...This is only likely to change once the FX market can no longer ignore the scenario of rising US interest rates, but that might well be some months off."