5 Nov 2013
Flash: The ECB doing homework, EUR/USD to weaken through trendline? – Societe Generale
FXstreet.com (London) - Sebastien Galy, analyst at Societe Generale said that the ECB published a paper on the feasibility of counter cyclical buffers this morning, ahead of the ECB meeting. In the business of signalling, this is stating we are doing our homework.
Key Quotes:
“Parts of core Europe housing market will eventually need these counter cyclical buffer and it might be the price to pay to agree to a rat cut, one would presume. A few months ago, officials were crystal clear that they had done their home work extensively on the implication of a rate cut on financial instruments, the financial system and the linkage between rates and other financial assets. Our economists expect a rate cut in Dec which seems to be where consensus is heading”.
“Has the FX market already priced this in? In good part, but the temptation to break below the EURUSD upward trending channel will probably be too strong. A rate cut will encourage more flows into the Euro periphery likely leading to a stabilization of eurusd in a wide range”.
“UK data continues to be very solid helping EURGBP to gap down towards the 0.84 support. While a consolidation is now likely the market is likely to trend lower after this period on a continued divergence between the UK and EU business cycle”.
Key Quotes:
“Parts of core Europe housing market will eventually need these counter cyclical buffer and it might be the price to pay to agree to a rat cut, one would presume. A few months ago, officials were crystal clear that they had done their home work extensively on the implication of a rate cut on financial instruments, the financial system and the linkage between rates and other financial assets. Our economists expect a rate cut in Dec which seems to be where consensus is heading”.
“Has the FX market already priced this in? In good part, but the temptation to break below the EURUSD upward trending channel will probably be too strong. A rate cut will encourage more flows into the Euro periphery likely leading to a stabilization of eurusd in a wide range”.
“UK data continues to be very solid helping EURGBP to gap down towards the 0.84 support. While a consolidation is now likely the market is likely to trend lower after this period on a continued divergence between the UK and EU business cycle”.