Saturday, October 3, 2015

EUR/USD to continue to fall as Fed and ECB drift apart in monetary policy - Commerzbank

FXStreet (Córdoba) - FX markets are currently reacting more strongly to the comments of central banks than to data publications, and according to Antje Praefcke, analyst at Commerzbank, this does not change the fact that the Fed and the ECB are drifting apart in monetary policy and EUR/USD will therefore fall.

Key Quotes

“Foreign exchange rates have been moving in very narrow ranges recently and have mostly barely reacted to the economic data. The likely reason is that major central banks like the ECB, BoJ, BoE or the SNB have already launched extensive asset purchase programmes or even introduced negative interest rates so small deviations from the expectations in the data will hardly lead them to change their monetary policy”.

“The fundamental data would presumably have to surprise on several accounts to prompt a reassessment of the situation in the near term and thus a change of monetary policy. Smaller deviations are irrelevant and therefore ultimately not worthy of a larger market reaction”.

“Statements by central bankers that give an indication of a possible change of monetary policy are therefore more important. Consequently, larger movements on the FX market are primarily to be expected after major central banks have spoken out”.

“Only in the case of the Fed could economic data possibly influence the timing of the first rate rise”.

“As the monetary policies of the Fed and ECB clearly diverge, the signs are still for falling EUR/USD rates”.
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