Waiting for Godot … or trading the Euro
Or is it waiting for Mario? The minutes coming from the meeting of the Fed yesterday did not give the markets the stimulus they were hoping for. There was a general acknowledgement that things are slow in the USA and everything is under close scrutiny. This could be loosely translated as jam tomorrow. No stimulus today, but maybe tomorrow. All eyes turn to the ECB now. After Mario Draghi’s comments last week, the market expects to see just what was meant by “everything in our power to save the Euro and it will be enough”. A drop in interest rates won’t qualify, as...
Read MoreECB impact on GBPUSD
ECB Impact on GBPUSD On 20 June, I wrote about central bank power and the impact the ECB can have on the currency value. This was in evidence again this week on Thursday, when Mario Draghi, the head of the ECB, stated they would do “whatever it takes” to save the Euro. I have chosen to illustrate the impact of his speech on GBPUSD, rather than the Euro. The 4 hour candle on EURUSD was 199 pips in range. The candle length for Cable was 232 pips. In either case, very significant movements. One of the “excuses” for weak GDP figures in the UK has been the turmoil in...
Read MoreUK GDP and the Olympics
UK GDP figures show a third consecutive quarter with the economy shrinking, or as the official term goes, negative growth. The quarter on quarter drop of 0.7% was far greater than the 0.2% anticipated by the markets. Naturally, the value of sterling fell after the announcement. I don’t know about you, but I have some sympathy for those claiming the weather slowed the economy down. With the wettest April and June for more than a century, it was hardly surprising that construction output fell. I can just imagine all of the muddy waterlogged building sites at a virtual standstill. I have...
Read MoreA little optimism
Optimism in the markets seems as rare as sunshine in a British summer this year. But as the sun comes out, the temperature soars. Phew, it’s hot right now. The same is true with optimism and the Euro. A few comments this morning about changing the status of the European Stability Mechanism (ESM) by an ECB council member sent the Euro soaring as well. Ewald Nowotny suggested the ESM could be classified as a bank, although no formal discussions have taken place with this objective. The optimism from this simple statement had the Euro appreciating fast against the Dollar. Why does this...
Read MoreJust like buses – central banks announcements
Last week was notable for news affecting the value of major currencies. We waited all week for announcements from central banks and just like buses, three came along at once. The Bank of England’s announcement to print another £50 billion was anticipated. The markets knew that was going to happen. At the moment of the announcement, a small blip in the value of GBPUSD just confirmed the inevitable. The European Central Bank then duly obliged with a quarter point cut from 1%. This bit was expected by the market. The Euro went into free fall on the back of the ECB reducing the overnight...
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