The European Central Bank must keep an eye on the euro exchange rate to assess whether it poses a risk to the medium-term inflation outlook, ECB Governing Council member Ardo Hansson said on Wednesday. In recent weeks, the ECB has spoken frequently about the currency and warned that any further strengthening could lead it to […]

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EUR/USD has posted gains in Wednesday trading, as the pair has climbed to the mid-1.38 range in the European session. Eurozone and German PMIs beat their estimates, although the French releases fell short of expectations. In economic news, Eurozone and German PMIs beat the forecast, but French PMIs did not keep pace, missing expectations. In the US, today’s major event is New Home Sales. The markets are […]

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EUR/USD will be starting this week just under 1.39, which acted as resistance to end the week. We also see a slight dip to start the week as the market trades EUR/USD during the 4/14 Asian session. Overbought: The daily stochastic reading is around 90, which is overbought, so we can expect some intra-session bearish attempt. However, the overall bullish trend seen in the daily chart appears intact, and the EUR/USD looks poised to test 1.3966 after resolving the overbought condition…

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Debt markets think the euro zone debt crisis is over and are “underpricing” the risks, Axel Weber, former head of the Bundesbank, Germany’s central bank, has warned. “Markets, when they re-price, always overshoot. But at the moment, as they’re re-pricing to a normal situation, they’re also overshooting,” Weber, currently chairman of Swiss bank UBS, told […]

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The key event risk today was ECB’s monetary policy statement and the press conference that followed. While the bank announced so change to its policy, it did mention that it had more discussion of QE, and it did expect a prolonged period of low inflation. This basically keeps the hope alive that the ECB will still reduce rates or apply some other method of loosening policy. The market traded down the euro. We saw the EUR/USD crack this week’s low…

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The ECB announced that it will hold the benchmark interest rate at the historic low of 0.25%. This is expected by most, though some have been expecting the bank to take another step toward looser monetary policy. President Mario Draghi made the ECB’s policy statement and fielded questions from the media regarding the bank’s monetary policy during his press conference. He summed up policy expectation by saying, “We don’t exclude further monetary easing”. He also noted that this readiness to loosen policy is based on deflationary risk…

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EU annual CPI for March came in at 0.5%. This slowed from the 0.7% in February, and missed forecast of 0.6%. It is also the slowest pace of inflation since November 2009, when the annual CPI was 0.6%. Deflationary risk is a factor the ECB has been concerned with, but it is not the dominating factor during the 3/31 European session so far. Month-end and risk-on flows are helping the EUR, and softening USD, and JPY…

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Fundamentals Event Risks: The EUR/USD has been bearish for a couple of weeks. There was USD-strength after an FOMC statement, and there was a weaker EUR after the market saw signs that the ECB is getting ready to cut rates. Deflationary risk has been a major factor contributing to ECB’s dovish lean. EU 1) This coming Monday, we will see EU CPI data for March. Annual inflation is forecast to be 0.6% after a 0.7% reading in February. This will reflect…

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