Daily Fundamental Outlook of EUR/USD:- The EUR/USD eased by 39 points to trade at 1.3846 after comments from ECB members that the strength of the euro would cause the bank to inject stimulus to offset the rise. Draghi and associates are hoping the threat of stimulus will prove as successful as actually injecting some liquidity into the markets. ECB policymakers offered new hints on possible unconventional measures at the IMF/World Bank meetings during the weekend. Coeure suggested the ECB could buy a broad range of assets with maturities of up to 10 years, while Draghi said a further strengthening of the euro would require more accommodation. According to Coeure, purchases would be linked to the interest rate maturities that are most important for firms’ and households’ investment and consumption decisions. This tends to be the intermediate to longer part of the curve. The ECB asset purchases should take into account the various benchmarks for loans prices in the various national jurisdictions. Finally, to achieve a homogenous reduction of term premiums across relevant markets, segmentation has to be taken into consideration. So the size of the purchases is not so important, but the effect on the premiums in different market. During the weekend, ECB’s Draghi ‘warned’ at IMF spring meeting in Washington that a strengthening of the exchange rate of the euro required more monetary stimulus. Draghi and other ECB members elaborated also on the details of a potential QE program. At the same time, Ukraine is also returning into the spotlights as the government in Kiev has given separatists an ultimatum to lay down arms....
Posted on: Tue, 15 Apr 2014 05:35:03 +0000
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