- Shorted 10 $large at 1.3600 and looking to take profit at 1.2700 with a stop at 1.3830
“The ECB continues to push a dovish message, most recently suggesting a numerical negative deposit rate target. While we don’t expect imminent policy action, we do think the growth backdrop will ultimately force the ECB to do more. As such, we like selling the EUR on rallies”
“The next EMU HICP flash print, which is out on Friday, November 29, will be extremely important – with the last one at 0.7% seemingly provoking the ECB to cut its refi rate. A key risk to our trade could be a lack of action from the ECB to fight disinflationary pressures,”
“The geographic break down of CPI within Europe shows that the disinflationary pressure is not confined to the periphery (see Exhibit 2) where austerity and constrained credit conditions have been the most extreme, but is broad based with even core EMU countries experiencing a sharp decline in CPI. Draghi has also observed that disinflationary pressure in EMU is broad based. As a result, the ECB is likely to be more sensitive to any further sharp declines in the inflation rate, we believe, leaving the EUR vulnerable to soft inflation indicators,”
Courtesy of EFX and QassamH in the twittersphere.
How do you find their reasoning?
I think the key point is the second paragraph. The ECB will hold off any further policy moves until the rate cut filters through. If they do react in short time then Morgan’s will be on their way to their profit target as it will show the level of worry at the ECB.
