FX Brief: ECB hints of rate cuts and QE undermines EUR and underpins DAX
Fawad Razaqzada July 25, 2019 1:14 PM
A summary of news and snapshot of moves ahead of the US session.
- As we had expected, the ECB kept rates unchanged but said it now expects interest rates will remain at present "or lower" levels until the first half of 2020. Here are the key highlights from the statement:
- "Governing Council expects the key ECB interest rates to remain at their present or lower levels at least through the first half of 2020."
- …the "need for a highly accommodative stance of monetary policy for a prolonged period of time, as inflation rates, both realised and projected, have been persistently below levels that are in line with its aim."
- Governing Council noted that it was "determined to act, in line with its commitment to symmetry in the inflation aim. It therefore stands ready to adjust all of its instruments, as appropriate, to ensure that inflation moves towards its aim in a sustained manner."
- …the Governing Council "has tasked the relevant Eurosystem Committees with examining options, including ways to reinforce its forward guidance on policy rates, mitigating measures, such as the design of a tiered system for reserve remuneration, and options for the size and composition of potential new net asset purchases."
- After a quick knee-jerk reaction, the markets reacted as you would have expected. The EUR/USD fell to a new session low near 1.1100 while the DAX and gold hit fresh session highs after the ECB altered its forward guidance.
- French 10 year bond yields fell to record low -0.16% while the equivalent German bund yield dropped to a new record-low of -0.41%. Earlier, we saw the entire Switzerland yield curve drop into negative territory with the 50-year yields dipping below 0% for the first time since August 2016.
- ECB President Mario Draghi is due to start his press conference at 13:30 BST – expect more volatility for the above markets.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.