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4 Dec 2014
Euro hammered by decoupling trade – KBC
FXStreet (Barcelona) - The KBC Bank Research Team notes that EUR was hit hit hard on soft EMU services PMI data, with EUR/USD pair slipping below the 1.2358 low.
Key Quotes
“On Wednesday, the euro was hit hard as the weak EMU services PMI contrasted sharply with ongoing strong readings in the US and in the UK. EUR/USD slipped below the 1.2358 year low and settled in the low 1.23 area. Later in the session, the dollar remained well bid across the board, supported by a strong US non-manufacturing ISM. The trade-weighted dollar set a new cycle high. USD/JPY came within reach of the 120 barrier.”
“The key factor for trading today will be the ECB press conference. ECB president Draghi was very soft of late and indicated that the ECB is ready to take action if needed. Recent EMU data only reinforced the case for more stimulus. So Draghi will remain very soft.”
“Question is whether the ECB presidents will already (pre)announce additional policy steps or give concrete details of new measures the ECB is preparing. We assume that he will stop short of this last step. This might cause some disappointment in a market which is extremely engaged in the ‘anti-deflation trade’. So, a repositioning on the bond market and in the euro is possible.”
“However, we don’t have the impression that there is much room for a sustained rebound of the euro. So, any upticks are still a selling opportunity.”
Key Quotes
“On Wednesday, the euro was hit hard as the weak EMU services PMI contrasted sharply with ongoing strong readings in the US and in the UK. EUR/USD slipped below the 1.2358 year low and settled in the low 1.23 area. Later in the session, the dollar remained well bid across the board, supported by a strong US non-manufacturing ISM. The trade-weighted dollar set a new cycle high. USD/JPY came within reach of the 120 barrier.”
“The key factor for trading today will be the ECB press conference. ECB president Draghi was very soft of late and indicated that the ECB is ready to take action if needed. Recent EMU data only reinforced the case for more stimulus. So Draghi will remain very soft.”
“Question is whether the ECB presidents will already (pre)announce additional policy steps or give concrete details of new measures the ECB is preparing. We assume that he will stop short of this last step. This might cause some disappointment in a market which is extremely engaged in the ‘anti-deflation trade’. So, a repositioning on the bond market and in the euro is possible.”
“However, we don’t have the impression that there is much room for a sustained rebound of the euro. So, any upticks are still a selling opportunity.”