Economic Insights
Dollar counterparties turn lower sharply on “no immediate bold action” from ECB
Investors paid little attention to other events this week, including the Federal Open Market Committee (FOMC) meeting earlier on because all the focus has been put on ECB President Mario Draghi’s statement yesterday. However, they failed to find any solution from Draghi. In myDaily Market Report article yesterday, I have mentioned that there could be a risk of disappointment due to a few barriers that cannot be easily cleared at this stage. So it happened.
From his pledge to “do whatever it takes” to a much softer tone that is “within the ECB’s mandate to maintain price stability over the medium term and in observance of its independence in determining monetary policy, it may undertake outright open market operations (OMO)” and “may consider undertaking further non-standard monetary policy measures according to what is required to repair monetary policy transmission”, obviously lacking of the implementation details such as which instruments to be used and the rescue size, etc. and it disappointed the investors; in addition, the word “may” also suggested the determination is not that strong compared with a week ago.
From the statements I saw yesterday, strict conditionality remained there if any governments want to receive the bailout from the European Financial Stability Facility (EFSF) or the European Stability Mechanism (ESM). However Germans’ reservation about the large scale of bond buying is also the concern and it is one of the biggest “bull’s barriers. In the absence of immediate bolder actions, the Spanish 10-year bond re-visited the key benchmark level of 7%.
Source: BloombergClick the image to enlarge
In my point of view, any short term money offered to those peripheral countries will not be without prerequisites, besides the vigorous conditions and supervision. The tougher thing is that the ECB might need the compromise from Bundesbank that it will not violate with the current monetary policy, and I do not rule out the reason that no bolder action to be announced yesterday.
The Euro Zone’s economic releases so far are far from enough to lower the volatilities in the region. The ECB’s intervention is the quickest policy action to reduce near term tail risk while institutions and corporate hedging could be reduced as well. Thus a decreased volume would be a catalyst for those high risk and high yield (HY) currencies. I also believe that the door for the ECB’s bond buying programme in the coming weeks is not closed yet because Draghi may just need to convince some parties before he can cash his bolder words last week.
Non-Farm Payrolls (NFP) tonight unlikely to attract much attention from the Federal Reserve (Fed)
The US July’s jobs report is easy to create deviation among the analysts due to seasonal adjustment for the auto-plant shutdown. With that said, in order to get a clearer picture of the US employment market, you may need to wait for another one or two months.
In my point of view, any short term money offered to those peripheral countries will not be without prerequisites, besides the vigorous conditions and supervision. The tougher thing is that the ECB might need the compromise from Bundesbank that it will not violate with the current monetary policy, and I do not rule out the reason that no bolder action to be announced yesterday.
The Euro Zone’s economic releases so far are far from enough to lower the volatilities in the region. The ECB’s intervention is the quickest policy action to reduce near term tail risk while institutions and corporate hedging could be reduced as well. Thus a decreased volume would be a catalyst for those high risk and high yield (HY) currencies. I also believe that the door for the ECB’s bond buying programme in the coming weeks is not closed yet because Draghi may just need to convince some parties before he can cash his bolder words last week.
Non-Farm Payrolls (NFP) tonight unlikely to attract much attention from the Federal Reserve (Fed)
The US July’s jobs report is easy to create deviation among the analysts due to seasonal adjustment for the auto-plant shutdown. With that said, in order to get a clearer picture of the US employment market, you may need to wait for another one or two months.
Source: BloombergClick the image to enlarge
Due to the potential “fiscal cliff” and soft Q2 earnings from the US companies, it is unlikely to see an upbeat figure to appear from the Bank Lending Survey (BLS) report because the caution of the employers affects the outcome. The US Institute of Supply Management (ISM) Purchasing Managers Index (PMI) released two days ago suggested the difficult external operating environment because new orders contracted sharply, as well as the growth in the employment
Due to the potential “fiscal cliff” and soft Q2 earnings from the US companies, it is unlikely to see an upbeat figure to appear from the Bank Lending Survey (BLS) report because the caution of the employers affects the outcome. The US Institute of Supply Management (ISM) Purchasing Managers Index (PMI) released two days ago suggested the difficult external operating environment because new orders contracted sharply, as well as the growth in the employment
.
Source: BloombergClick the image to enlarge
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Disclaimer
The analysis we provide is based on the average estimate of price movements in one day. Does not guarantee what we deliver is actually a proper and correct. Everything that happens in the decisions you make on your trading transaction is to be Your responsibilities.
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Blog Post This Week Suggested Trade With :
Disclaimer
The analysis we provide is based on the average estimate of price movements in one day. Does not guarantee what we deliver is actually a proper and correct. Everything that happens in the decisions you make on your trading transaction is to be Your responsibilities.
Visit Us www.deryworldscorp.web.id
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