Vector Securities - Analytics

    Vector Securities

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    No one knows for sure what the ECB will do, everybody expects outcome


    Yesterday tendencies of the week remained the same – euro, yen and pound moved in the range, trade currencies followed energy prices. We have nothing to add to current situation – players are waiting for decisions of main regulators. Today at Asian session even the report on Chinese inflation has been perceived indifferently, though it was considerably better than expected.

    Today only one question is on the agenda – the ECB decision on monetary policy. Last year the regulator announced new stimulation measures at March session. Since that time something has changed. Expectations of sharp worsening of economic situation weren’t met. As before, inflation remains low and continues to raise concerns. Recovery of energy prices recorded in last weeks can do the most part of the ECB’s work on decreasing deflation threat. Investors paid attention to this fact and therefore they became more cautious about euro’s sales. It doesn’t mean that the regulator will start breathing easier and leave everything unchanged. Most economists expect the ECB to lower deposit rates by 10 basic points once again and increase monthly volumes of bonds buying-out. Probably, such decision is largely included in the price. Much will depend on volumes of buying-out – to what extent this option will be implemented. Market’s reaction depends on it.

     

    Trade tactics:

    Yesterday as we recommended we opened long position in euro from 1.0965, but we closed the position for 1.1021 and decided not to keep it for long in unstable market. Today we prefer not to enter the market. We have no clear view of market’s reaction to the ECB actions. Plus, we have no clear understanding which measures the ECB will undertake. We are waiting again.

     

    Any opinions, advice, news, research, analyses, prices or any other information presented on this webpage is provided as general market commentary and does not constitute investment advice. "Vector Securities" shall not be liable for any loss, including loss of profit, which may arise directly or indirectly from the use of this information.


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