The recovery in the euro is gathering pace as markets are responding to the surprisingly hawkish comments from the ECB’s chief economist Peter Praet. In a speech yesterday, Praet suggested that the ECB could begin to formally discuss the winding down of the massive asset purchase program that has bought around €2.5bn and currently runs at €30bn per month. This would be a decisive step forward in the normalisation of monetary policy that the market has been anticipating for a while but until now has been able to position for (due to a strong of data disappointments). Now, with inflation surprising to the upside and the hawkish comments from one of the ECB’s most dovish Governing Council members, this could be a trigger for renewed euro strength. These hawkish comments have meant that bond yields across major markets have increased sharply and yield differentials are playing a role in performance of currencies. Interestingly, this means that the dollar has also suffered across the major pairs, a move which continues today. Whilst the euro accounts for over half of the Dollar Index, the dollar is down again and trading around two week lows. Risk appetite also remains strong, with a decisive push higher on US equities with the VIX volatility falling consistently to levels not seen since January.
This is from last thursday ... There is just no point being short ...
This is from last thursday ... There is just no point being short ...
