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#1 25-05-2020 18:14:53

johnedward
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From: Paris - France
Registered: 21-12-2009
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EUR/USD: Last week's ECB minutes were a slap in the face for bulls

EUR/USD: Last week's ECB minutes were a slap in the face for bulls


At the end of last week, reports on the ECB meeting took the markets by surprise, highlighting a dovish tone, and some concerns were so bad that they sent the pair tumbling by Friday's close. The ECB's statement was a slap in the face for the pair's bulls, especially since the EUR/USD traded in positive territory due to the likelihood that both Germany and France reach a fiscal agreement.

The reports refer to the 2-day meeting held at the end of last month. Beyond the dovish statements, the ECB is raising concerns about other fiscal issues. More specifically, the ECB fears that the Member States will be encouraged to act carelessly following intervention in the sovereign bond market.

Concerns about the TLTRO-3 plans

The ECB also fears that the recent conditions of the Targeted Long-Term Refinancing Operations encourage banks to tighten the screws on loans (home loans and gov't loans).

Of course, this is just one of several concerns, but the decision was nonetheless made and announced.

The minutes also recalled that the Harmonised Index of Consumer Prices (which measures how fast prices rise) is falling - it reached 0.35% last month, down from 0.65% the previous month, and such deflation worries are adding pressure on the central bank's decision-makers.

As a result, the EUR/USD didn't take kindly to the overall message, and it traded in a dovish tone afterwards. The pair, which hit 1.1010 on Thursday, dropped to 1.0895 on the following day and is now still hovering around this same level.

Once the virus situation has passed, traders will have a better grasp of the market's direction and where the ECB will be going as far as it's next decisions.

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