Week in FX Europe – ECB Is Moving The Market, But Not The Economy Just Yet

The ECB did not need to take on any additional, more aggressive stimulus this week – instead they had Draghi mouthing deposit rates and negative yields. In the end it had the same impact as an aggressive cut – the single currency happened to plummet three-big-figures. Investors were mostly looking for this weeks ECB rate ease to be the first on a list of measures to support a Euro-zone recovery. In the end all they might be getting is an ECB that is able to move the market and not the economy.

Why did Draghi say that his Central Bank was “technically ready” to take the deposit rate into negative territory? The predominant reason would most likely be because of Germany – the backbone of Europe. Capping the EUR against the currencies of Germany’s major export market would help the Euro-zones largest economy avoid any prospect of its domestic industry having the need to restructure to maintain its export prowess.

Is he really that good at manipulation? The ECB must be doing something right, the current yield on Greek 10-year debt is trading just below +10% for the first time in nearly three-years. Just under a year ago it was trading north of +41% and yet the debt crisis remains unresolved. Investors seem comfortable having Draghi and the ECB as the last resort backstop!



* EUR Euro-Zone Retail Sales (YoY)
* AUD Reserve Bank of Australia Rate Decision
* AUD Employment Change
* GBP Bank of England Rate Decision
* CAD Unemployment Rate

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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell