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Dec 21, 2014

10:49 AM EDT

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Market Analysis

Home » Latest News » GBP and EUR Routed, ECB Balance Sheet at Record, S&P Falls to Low for the Week

GBP and EUR Routed, ECB Balance Sheet at Record, S&P Falls to Low for the Week

While Italy managed to have a successful auction of short-term 6-month debt, market jitters are still there in regards to the 10-year debt on offer by Italy in tomorrow’s trading session.

Italian 10-Year Yield - Italian 10-year yields rallied after dipping initially after the short-term debt auction, moving back above 6.9%.

With the overhanging fear about the euro zone sovereign debt crisis the open of US cash equity trading saw a flight to safety and a move into safe haven currencies like the Japanese yen and US dollar, with month-end and year-end flows coinciding with thin liquidity conditions exacerbating market moves.

Headlines showing that the ECB balance sheet his a record high likely put the market on edge.

From Bloomberg: “Lending to euro-area banks jumped 214 billion euros ($280 billion) to 879 billion euros in the week ended Dec. 23, the Frankfurt-based ECB said in a statement today. Its balance sheet increased 239 billion euros to 2.73 trillion euros, it said. That’s 553 billion euros more than three months ago.

EUR/USD – The EUR/USD which had been trading in a tight range, pushed below this week’s lows puncturing the 1.30 level before finding some support.

AUD/USD – The US dollar was the most sought after currency pair in early NY trading, erasing earlier losses to the Australian, New Zealand, and Canadian dollars

GBP/AUD – The euro and pound were weaker against the commodity bloc – showing a reluctance of the market to hold European “higher yielders” with the pound even weaker than the euro.

EUR/GBP – The softness of the Pound was evident in the EUR/GBP pair which moved to test its highs from yesterday’s session at the 200-ema.

S&P - No breaking news drove the move towards safety, though the S&P shed overnight gains and hit a low for the week.


Nick Nasad is the Chief Market Analyst at FXTimes – provider of Forex News, AnalysisEducationVideosCharts, and other trading resources.

Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analysis.

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