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1 Nov 2013
Flash: Sentiment it is a-changin' - Danske Bank
FXstreet.com (Athens) – Analyst Kasper Kirkegaard on behalf of Dasnke Bank suggests that Sentiment it is a-changin’. Not least on the currency market!
Key Quotes
“In less than one week the market has gone from being fairly bullish on the euro for the short term to unwinding long positions from stretched levels (at least that is what the spot reaction indicates). Perhaps the most important change with yesterday’s low European inflation number is that the market will now begin to look at the ECB again.”
“Focus has almost exclusively been on the dollar-negative effects of the postponed Fed tapering but now speculations have re-emerged about potential ECB easing and the first analysts are out calling a refi rate cut. This makes the decline in euro excess liquidity less of a euro supportive factor, as the ECB should be less willing to accept a de facto tightening of financial conditions with inflation at these levels.”
“Hence, odds are that we have seen the peak in EUR/USD for 2013 and at least short-term risks have become two sided again.”
“The big question is how much more potential there is for position unwinding to move EUR/USD lower. We will know more with the IMM positioning report published tonight (even though this does not cover the past couple of days).”
Key Quotes
“In less than one week the market has gone from being fairly bullish on the euro for the short term to unwinding long positions from stretched levels (at least that is what the spot reaction indicates). Perhaps the most important change with yesterday’s low European inflation number is that the market will now begin to look at the ECB again.”
“Focus has almost exclusively been on the dollar-negative effects of the postponed Fed tapering but now speculations have re-emerged about potential ECB easing and the first analysts are out calling a refi rate cut. This makes the decline in euro excess liquidity less of a euro supportive factor, as the ECB should be less willing to accept a de facto tightening of financial conditions with inflation at these levels.”
“Hence, odds are that we have seen the peak in EUR/USD for 2013 and at least short-term risks have become two sided again.”
“The big question is how much more potential there is for position unwinding to move EUR/USD lower. We will know more with the IMM positioning report published tonight (even though this does not cover the past couple of days).”