After ECB Rate Decision, All Eyes on Fed
Joe Perry September 12, 2019 4:19 PM
The ECB had cut rates 10 bps, as the market was expecting. However, as we noted in our ECB Recap, the ECB also announced that they would introduce OPEN- ENDED QE at a rate of EUR 20bln/month. The ECB sent a message to the market that there is no targeted end date to QE.
The market took the news as dovish, as EUR/USD dropped 100 pips to previous lows from September 3rd, while DXY rose 50 pips, near towards resistance from the same date.
Souce: Tradingview, FOREX.com
Source: Tradingvew, Forex.com
However a half hour later, US President Trump came out a message of his own:
“European Central Bank, acting quickly, Cuts Rates 10 Basis Points. They are trying, and succeeding, in depreciating the Euro against the VERY strong Dollar, hurting U.S. exports.... And the Fed sits, and sits, and sits. They get paid to borrow money, while we are paying interest!”
As you can see from the charts above, EUR/USD and DXY quickly reversed course and surpassed levels from before the ECB announcement! Why? Because now all eyes are on the FOMC meeting next week on September 18. The market is currently pricing in a 100% chance of a rate cut next week, a majority of which is expecting a 25bps cut.
Powell insists the Fed is an independent government body (as it should be). But one needs to consider…will the FOMC feel the pressure from President Trump to cut more than it really wants to (even after he called Powell a “bonehead’ yesterday)?
Disclaimer: GAIN Capital UK Limited (trading as "Forex.com") is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, Forex.com does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by Forex.com or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although Forex.com is not specifically prevented from dealing before providing this material, Forex.com does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
For further details see our full non-independent research disclaimer and quarterly summary.