Eurozone sentiment continues to languish today, as the market’s dissatisfaction about EU summit conclusions festers, and investors brace for the possibility of France losing its AAA credit rating. Thus far there have been no advanced warnings of if or when the sovereign downgrade might precipitate, but there is increasing rhetoric from French policymakers that appears to be conditioning the market for such a scenario in the near future. EURUSD currently trading around 1.3000 having dipped to a low of 1.2945 yesterday, and Asian equity markets have had an extremely negative day; the Nikkei is -1.7%, Hang Seng -2.1%, and Shanghai Composite -2.1%.
The Norges bank shocked the market yesterday by cutting interest rates by 50bp to 1.75%. Going into the announcement, the consensus expectation was for a cut of only 25bp – with a minority of analysts looking for no change in rates at all. The actual outcome was therefore much more dovish than anyone had predicted, and demonstrates just how anxious the central bank is to pre-empt a downturn in the new year.
Coming up in today’s session, the headline event is undoubtedly the latest SNB meeting. Swiss interest rates are already set at rock-bottom 0.00%, so it is not anticipated that any action will be taken on the rates side of their monetary policy. However, there has been long speculation that the central bank may take this opportunity to raise the EURCHF exchange rate floor from 1.2000 to 1.2500 or perhaps even 1.3000. There are rumoured to be a number of hedge funds betting on such an announcement so expect a lot of volatility around the time of the release. Given the recent collapse in EURUSD and EUR-crosses, the main risk is that the SNB does not formally raise the EURCHF floor – an outcome that would likely lead to significant EURCHF selling as speculative longs liquidate.
Other key releases scheduled for release today include Eurozone PMI surveys and CPI for November, UK retail sales, US PPI, jobless claims, and industrial production figures.
By
The Norges bank shocked the market yesterday by cutting interest rates by 50bp to 1.75%. Going into the announcement, the consensus expectation was for a cut of only 25bp – with a minority of analysts looking for no change in rates at all. The actual outcome was therefore much more dovish than anyone had predicted, and demonstrates just how anxious the central bank is to pre-empt a downturn in the new year.
Coming up in today’s session, the headline event is undoubtedly the latest SNB meeting. Swiss interest rates are already set at rock-bottom 0.00%, so it is not anticipated that any action will be taken on the rates side of their monetary policy. However, there has been long speculation that the central bank may take this opportunity to raise the EURCHF exchange rate floor from 1.2000 to 1.2500 or perhaps even 1.3000. There are rumoured to be a number of hedge funds betting on such an announcement so expect a lot of volatility around the time of the release. Given the recent collapse in EURUSD and EUR-crosses, the main risk is that the SNB does not formally raise the EURCHF floor – an outcome that would likely lead to significant EURCHF selling as speculative longs liquidate.
Other key releases scheduled for release today include Eurozone PMI surveys and CPI for November, UK retail sales, US PPI, jobless claims, and industrial production figures.
By
M.Zohaib Gadit
Forex Tradind Consultant
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