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4 Dec 2014
EUR/USD expects dovish Draghi – TDS
FXStreet (Barcelona) - The Analysts at TD Securities expect the ECB to hold fire until Q1 next year, and notes that EUR/USD trading near 1.23 levels already reflects the dovish expectations from Draghi.
Key Quotes
“The ECB meeting today is, in our opinion, unlikely to deliver any significant ramp up of the current asset purchase programme. We rather expect the ECB to hold fire until Q1 next year when fundamental justification for additional, aggressive steps (QE) are clearer for the more conservative members of the governing council. That does not mean that the statement and press conference do not contain risks for the EUR—in the form of possible forecast revisions (downwards), adjustments to existing lending programmes and dovish remarks from President Draghi. But to some extent, EURUSD trading near 1.23 already reflects that expectation.”
“He will likely reiterate the willingness to act quickly and perhaps he will find a way once again to highlight the developing growth and policy divergence between the Eurozone on the one hand, and the US on the other, to try and keep the EUR exchange rate rolling downhill.”
“Meanwhile, we had thought that the combination of a dovish ECB and decent Non-farm Payrolls data on Friday would provide a significant double blow to the EUR into the end of the week. But our reckoning suggests the risk of a downside miss relative to the market consensus (+222K) for payrolls has risen over the course of the past few days (considering the softer than expected ADP data and the drop in the ISM Non-manufacturing Employment sub-component).”
“We still look for additional EURUSD softness today but, provided there are no significant policy shocks, a sub-200K outcome for NFP tomorrow could see EURUSD support around 1.2225 hold (the 200-month MA at 1.2230 currently has held every test since 2005) and provide the basis for a modest recovery into the end of the week.”
Key Quotes
“The ECB meeting today is, in our opinion, unlikely to deliver any significant ramp up of the current asset purchase programme. We rather expect the ECB to hold fire until Q1 next year when fundamental justification for additional, aggressive steps (QE) are clearer for the more conservative members of the governing council. That does not mean that the statement and press conference do not contain risks for the EUR—in the form of possible forecast revisions (downwards), adjustments to existing lending programmes and dovish remarks from President Draghi. But to some extent, EURUSD trading near 1.23 already reflects that expectation.”
“He will likely reiterate the willingness to act quickly and perhaps he will find a way once again to highlight the developing growth and policy divergence between the Eurozone on the one hand, and the US on the other, to try and keep the EUR exchange rate rolling downhill.”
“Meanwhile, we had thought that the combination of a dovish ECB and decent Non-farm Payrolls data on Friday would provide a significant double blow to the EUR into the end of the week. But our reckoning suggests the risk of a downside miss relative to the market consensus (+222K) for payrolls has risen over the course of the past few days (considering the softer than expected ADP data and the drop in the ISM Non-manufacturing Employment sub-component).”
“We still look for additional EURUSD softness today but, provided there are no significant policy shocks, a sub-200K outcome for NFP tomorrow could see EURUSD support around 1.2225 hold (the 200-month MA at 1.2230 currently has held every test since 2005) and provide the basis for a modest recovery into the end of the week.”