Vector Securities - Analytics

    Vector Securities

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    Draghi competes with the Fed for significance of influence on the market

    Once again, Draghi made a slight Armageddon in the exchange market. The ECB decided not to postpone deals and use almost all measures from its possible tools – decreased all rates (refinancing, deposit, margin lending, it increased volumes of bonds buying-out to 80 billion euro per month). This all exceeded expectations of the market. The initial reaction of the market was quite natural – the common currency fell by one and half figure. Then surprises occurred. Euro reversed sharply and went back rapidly. Probably, players thought that using such a broad set of instruments, the ECB limits its opportunities for implementation of additional measures of quantitative easing. Besides, the important fact was that under these conditions the Fed is unlikely to take further increase in rates at the nearest session next week. The behavior of stock indices also looks suspicious – new incentives didn’t provoke increase of demand for risky assets. On the contrary, they decreased considerably following outcomes of the day, though regained part of losses by the closure of the day. 
    The last day of the week is unlikely to be as active as the previous one. There are no drivers for it. Continuation of euro’s growth looks the most probable after yesterdays’ reaction to the ECB decision. Final data on inflation and retail sales of Germany can’t change current power of balance – they won’t become a surprise for the market even in case of weak data. Speaking of local data, reports on British foreign trade and Canadian unemployment are of interest. Still, in both cases they don’t play key role for corresponding currencies. In the first case talks about exit from the EU disappeared from front pages of newspapers, so pound has chances to continue bounce and in the second case everything depends on energy prices dynamics. 
    Trade tactics:
    It is too early to talk about sales after such active growth of EURUSD pair, though correction can be quite deep during the day. We recommend considering pair’s purchase from 1.1090 – 1.1120, stop at 1.0980, the initial aim at 1.1220. In case of a pair growth of more than 30 points from the entry point, rearrange stop at the entry point. 
    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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