tickmill-analytics

EURUSD: Unlikely that the ECB will bring out big guns in December The risk of contested elections has been pushed further into the background as Trump basically admitted defeat on Thursday saying that he will leave the White House if the Electoral college votes for Biden (which will almost certainly happen). US stocks remain in consolidation mode near all-time highs waiting for more news on the fiscal negotiations, OPEC decision on output quotas as well timeline for mass vaccination in developed economies. On Thursday we had crucial for the Euro speech by the ECB Chief Economist Lane and release of minutes of the November ECB policy meeting. Both events shed some light on the scale of monetary easing in December and had short-term implications for the Euro exchange rate. According to Lane, there are signs that the cost of credit funds for end borrowers are rising, as indicated by several surveys which assess availability of credit and investment activity. Since European debt markets are generally in good shapes while credit spreads are low, European Central Bank has little need to tweak asset purchases. Instead, the ECB is likely to expand the TLTRO lending program for banks. Euro will likely discount this measure as it usually responds to something more profound, such as a change in the deposit rate or bond purchases. The chances that FX markets will generally discount December meeting rose as expectations that the ECB will bring out the big guns in December became less relevant. Thanks to this, the EURUSD rate bounced up today. Adding to this the market received a number of economic updates on Friday, which showed that November lockdown in the EU has less than expected impact on consumer sentiment, business sentiments in the non-manufacturing, in particular the industrial sector: The readings indicated that the worst has been averted and that the blow to the economy was in line with expectations. At the same time, the index of business climate in the non-manufacturing sector fell more than expected from -11.8 to -17.3 points, against -15.5 points forecast. Next week, the upward trend in EURUSD is likely to resume, however, an important component for this will be a positive OPEC decision (extension of the current output cuts). Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company. High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 72% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.