ECB finally unwinds, sparking EuroBy Arnaud Masset
Expectations are mounting that the European Central Bank will finally taper its asset buying, called Quantitative Easing, as bank governor Peter Praet said it will be discussed at the bank’s 14 June meeting next week. Recovery in German yields accelerated yesterday with the 2-year and 10-year climbing 5 basis points to -0.6% and 10bps to 0.48%. Nevertheless, they are not back to their pre-Italian crisis levels, which suggests that investors have not dropped their guard.
After breaking 1.1745 resistance yesterday, EUR/USD is testing resistance area at 1.1835-1.19. A breakout of this area opens the door to 1.20. EUR/CHF consolidated at around 1.1615 as USD/CHF fell another 0.40% to 0.9825. Overall, we maintain our bearish USD view, especially against the single currency.