Watch Out Below! The Euro Bears Are Taking Control

  • The European Central Bank (ECB) opts for “lower for longer” quantitative easing and denies it is tapering.
  • Catalonia continues to be a risk.
  • US tax reforms continue to make progress.
  • Technically, the EUR/USD has broken decisively below the daily Ichimoku cloud.

Monetary Policy

The ECB opted to extend its asset purchase programme at the monthly rate of 30 billion euros, half of the current pace of 60 million billion per month, and committed to keeping key interest rates at current levels for “an extended period of time” last week. Markets took that as dovish and EUR sold off aggressively against the USD.

Buried within their statement is a sentence highlighting that the downside risks to the euro area growth outlook¬†“relate primarily to global factors and developments in foreign exchange markets”. This is a clear indication that the ECB does not want a stronger EUR.¬†The currency has appreciated more than 12% against the USD on the year and any rally will likely… Read more>>>