EUR: Schnabel pushes back against 50bp in December – ING
|EUR/USD found some support yesterday from a detailed interview given to Bloomberg by the ECB's influential Isabel Schnabel. A few of her comments stood out such as there was no need to take rates into accommodative territory (seen as sub 2%), the neutral ECB interest rates may be in the 2-3% area (2.00/2.25% is the commonly seen neutral rate) and that easing should be gradual, ING’s FX analyst Chris Turner notes.
1.0565/0580 may be the top of the short-term trading range
“Her pushback against a 50bp rate cut in December has helped market pricing for that meeting move in from 38bp last week to 28bp today. That has helped the 'Atlantic' rate spread narrow some 8bp and provided some support for EUR/USD. This spread could narrow further if the Fed cuts 25bp in December (ING house view) and the ECB only cuts 25bp (50bp is currently the house view).”
“But before we call for an extension in this EUR/USD correction, we should be wary of developments in French politics. Marine Le Pen's faction may well pull the plug on Michel Barnier's government next week over a budget vote. The French-German sovereign 10-year sovereign bond spread has widened to levels last seen in 2012, which is worrying for the euro and a reminder that any chance of fiscal support from either France or Germany is remote.”
“Indeed, we are surprised that EUR/CHF managed to edge higher yesterday and instead we can see it returning to the 0.9200/9210 area, where SNB bids may be waiting. 1.0565/0580 may be the top of the short-term trading range and we favour EUR/USD drifting back to 1.0500 in quiet markets.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.