The Dollar is supposed to be king – that’s what many had been hoping especially with a ‘hawkish’ Fed and a ‘dovish’ ECB running the show. Interest rate differentials are suppose to pull the “mighty” dollar higher against the 18-member single currency. If you ask a EUR bear, especially this week, you probably get the most frustrated of responses – they have been waiting patiently for most of this year to reap some reward from their ‘short’ EUR positions. It’s not happening anytime soon, especially now after the ECB’s reaction and rhetoric of this week’s monetary meet-up.
The ECB managed to wrong foot the markets that have been waiting for a response to the Euro-zone’s low inflation problem. With rates on hold at +0.25% and Euro policy makers unlikely to provide any monetary stimulus soon, trades that been wagered on a looser policy are bleeding and will only ever support the EUR in the short to medium term. Betting against the single unit looks wrong and has the bleakest of bears nearly raising both their arms in defeat. Trading above the psychological €1.39 pre-NFP on Friday equaled levels last seen in October 2011. Most of the negative trades have been strapped on assuming that the ECB was going to counter their low inflation problem with one of their controversial policies – negative deposit rates or QE. The upbeat message that followed the ECB rate decision from Draghi at his regular press conference post monetary meet, would suggest that neither of the tools would be deployed anytime soon or if ever. Now the bears have to wait and gage the pullback from Friday’s positive NFP report. If the USD does not get aggressively brought outright then the EUR bears could be in a heap of trouble – €1.40 and change looks so near!
- UK Fiscal Deficit May Force Austerity Measures
- ECB Upgrades 2014 Growth Forecast
- ECB’s Outlook May Push EUR/USD Higher
- ECB Draghi Warns Russia That Ukraine Crisis Can Have Severe Economic Impact
- UK Car Sales Rise 3 Percent in February
- European Central Bank Holds Rate at 0.25 Percent
- European Union Offer $15 billion in Aid to Ukraine
- European Commission Warns Italy About Lack of Reforms
- Bank of England Employee Suspension Related to FX Probe
- Eurozone PMI Shows Faster Growth in February
- UK PMI Survey Fuels Growth Optimism
- ECB Should Study Japan’s History
- UK Construction Shows Mixed Data in February
- Germany Key To Russia-Ukraine
- Russian Energy Vital for Europe Not US
- Putin Warns Against Counterproductive Sanctions
- Putin Denies Russian Soldiers Involved in Crimea
- Russia’s Woes with Wide Reaching Impact
- IMF Lagarde Cools Down End of Recession Optimism in Spain
- Hedge Funds Target Spanish Real Estate Investments
- French Housing Forecasting a Difficult Year
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.