Week in FX Europe – EUR On The Road To Nowhere Fast

This week had more to do with ‘what he said or she said’ rather than fundamental or technical data. Supposed rhetoric has been responsible of pushing currency values around. The EUR fell foul on a number of occasions to Central Bank antics surrounding the possible implementation of negative deposit rates. The 17-member single currency was able to finally pick it self off the floor after Draghi publically stated that the possibility of negative rates had not been discussed since the last Central Bank meeting.

For some time the forex market has been looking for inspiration. Many will say that it’s finally got it, deep in Q4 and just before the historically quiet holiday period where volume and liquidity become even more suspect. First, it was the possibility that the ECB would ever entertain cutting the deposit rate to -0.1% – the other side of that psychological line. Mentioning it never seemed consistent with other signals coming from other ECB officials, especially in downplaying the real deflation threat. Draghi put an end to that rumor, pushing back against the notion of negative deposit rates, saying there is no news on it since the last meeting.

The other source of inspiration this week was the highly touted FOMC minutes. The market seemed to take to heart the notion that the Fed is still prepared to taper at one of the next few meetings. This is not a new broadcast – the minutes did not break new ground. Bernanke has said the same thing earlier this week. Market consensus continues to look for tapering to be announced in March rather than next month. With the Euro-zone first weakening of confidence in a year this month certainly adds to concerns about the sustainability of the currency’s area’s weak return to economic growth. Market participants are taking a long hard look at the disparity between major central banks, and this has led to a massive adjustment to foreign exchange (forex) positions over the past two-trading sessions. Investors are happily willing to bet against the EUR for the time being – momentum is in their corner.

• German Growth Not Enough For European Optimism –
• German Economy Grows 0.3 Percent in Q3 –
• German Business Morale Rises in November –
• ECB’s Draghi Details Banking Bail In Program –
• ECB’s Chief Economist Warns on Deflationary Pressures –
• France Could be Bucking the Recovery Trend –
• U.K. Bond Yields Fall Before BOE Minutes –
• Regling: Spain’s Banks are now “Well-Restructured” –
• German Investor Confidence Rises in November –
• ECB Member Praet Sees Fragile Recovery But No Deflation Risk –
• Hedge Fund Managers See France As A Growth Risk –
• UK Central Bank Survey Shows Housing Concerns –
• Greece Reassumes Negotiations Amid Austerity Anger –
• OECD Says UK Growth Has Improved But Challenges Remain –

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