Posted on: 11 March 2016, by: Pepperstone Support, category: Market Review
All about the ECB today. The unconventional measures announced were as follows:
Cut the depo rate by 10bps (Expected)
Cut main refi rate and marginal lending rate each by 5bps (Surprise)
Expanded APP by EUR20bio to 80bio starting in April. (Surprise. Consensus was for 10bio)
Announced a new CSPP, which means IG EU bonds issued by corporates are now eligible for purchases by the ECB.
Launched a new series of four (4) targeted longer-term refinancing operations (TLTRO II) starting in June 2016.
Things did not go so swimmingly after that the Q/A. After saying that the ECB didn’t need to lower rates any further, EURO went from session lows to 1.11 in the span of three minutes .. give or take. The incredible whipsaw 5 handle day managed to wipe out both sides of the market before the European close. Risk was crushed with Euro trading as high as 1.1217 before settling in comfortably around 1.1180. On a side note, banks reported extraordinary volumes. We hear some reporting that they saw 250% of normal volume in EURUSD. That is some incredible turnover.
WTI was heavy as EUR recovered. This was in part, a response to the turnaround, and in part, response to fresh headlines. Reuters sources reported that the March 20 meeting between Opec and non-Opec producers isn’t likely to happen. More of the same explanation: Iran isn’t interested.
Gold was bid post ECB – trading as high as $1275. We see 1280/85 as tradeable resistance but wouldn’t stand in the way here as a break points to price trading well above $1300.
USDCAD was bid on the back of risk off/OPEC headlines and on talks that there is some very CAD negative M/A chatter. The 10bio deal would buoy price, which looks to have put in a decent low as long as risk remains offered.