The ECB is still pushing the markets around
Skerdian Meta • 2 min read
The ECB statement and press conference were pretty easy to decipher this time. There were comments like "The slight revision in the growth forecast and inflation are not substantial to change the monetary policy", "The ECB is having difficulties in finding enough assets to buy, which fall in the right category" and "We haven´t decided yet whether to extend the QE programme".
The message is quite clear, they´ll sit on the sidelines and see if everything fixes itself in the coming months before they come to a conclusion and make a decision. That gave the Euro pairs a boost in the beginning, but it quickly reversed and EUR/USD has given back all of today´s gains.
The ECB giveth, the ECB taketh away.
Where is the money flowing to?
1 – Out of the high yield currencies. The high yield currencies of NZD and AUD are suffering some heavy losses. AUD/USD and NZD/USD are nearly 100 pips lower from the top.
2 – Out of safe haven currencies. The ECB didn´t promise additional free money (QE) like the forex market had anticipated. The smaller the amount of spare cash available, the wiser you invest it, looking for higher return. That means, no more hiding your cash in safe have currencies which offer little return. So, the USD/JPY and USD/CHF forex pairs are making the biggest gains in about two weeks.
3 – Into bonds. Bonds offer some return and they are safe too, that´s why the bond yields are ticking up.
The ECB did their part, now let´s see in a couple of weeks what the FED has reserved. Hint, the dove of all FED doves Brainard, has scheduled a speech/interview on Monday. Is she on a mission to kill the market expectations of an interest rate hike after the recent disappointing US economic data? Hhhmmm.