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Euro rebounds after ECB officials dismiss QE


The dollar weakened on Monday as investors continued to digest Friday’s poor payroll’s data. The greenback also weakened versus the Euro after two members of the ECB governing council said the central bank probably wouldn’t ease policy in the near-future, but was more likely to wait. A sell off in equities led by technology stocks didn’t appear to help the dollar either, despite its safety credentials. Commentary from St Louis Fed’s Jim Bullard at a summit in Los Angles argued against the idea of coordinating central bank policy internationally, which had been put forward by the head of the Indian central bank, in a bid to bring more stability to financial markets. Tonight sees the release of Consumer Credit, which is expected to show a rise to 14.1bn in February.


The euro rose on Monday after two major figures from the ECB governing council, Ewald Nowotny and Yves Mersch dismissed speculation more easing was imminent. Nowotny said there was no reason to act immediately to counter euro-zone disinflation; Mersch said the ECB was drawing up plans for large scale asset purchases, but crucially that their implementation remained some way off. The euro recovered after weakening following the revelation that the governing council discussed QE for the first time at their meeting last week. Recent data showing a fall in inflation had also weighed on the single currency. The euro was further supported by data which showed a rise in Germany Industrial Production in February and a rise in Consumer Confidence to 14.1. Other data showed a fall in the ratio of debt to GDP in Italy to 2.8% from 3.4% previously.


The pound rose on Monday after continuing strong fundamentals maintained a positive outlook for the currency. Sterling was up versus the dollar, which weakened as a result of follow-through selling after the Non-Farm Payrolls undershoot on Friday. It was slightly up versus the yen too, which was weaker as a result of expectations of the BOJ increasing stimulus after the sales tax hike last week. Against the euro it fell after several ECB officials down-played the need for more easing yet. On the data front the only release was the Lloyd’s Employment Barometer in March, which showed a -2 fall, in line with the -2 print previously.


The yen rose versus the dollar but fell against riskier currencies, trading overall mixed on Monday. The currency gained support from haven-demand after technology stocks led a fall in global equities. Comments from ECB officials dismissing speculation of central bank easing, however, helped the euro against the yen. On the data front the leading Index fell more-than-expected to 108.5 when a lesser fall to 108.8 had been expected, from 113.1 previously. The Coincident Index fell in line with expectations to 113.4, also in February. Significant data will be published tonight showing the Current Account, which is expected to rebound from record lows to 618.1bn yen in February from -1589bn previously.

Tuesday, 08 Apr, 2014 / 6:16

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