It looks as though the reflation trade is not enough in and of itself to breath new life into the EUR/USD rally. There appear to be several factors behind this. First and foremost is the market is already loaded up to the gills with EUR/USD. Second is that Europe, while showing some green shots of its own, they are fewer and farther between than in the US. Third is that there is a higher degree of uncertainty heading into tomorrow’s ECB meeting than there has been in recent memory. A 25 bp cut is fully expected, but how aggressively the bank will pursue non-standard measures, if at all, is a total wild card.
Dealers noted strong selling from a UK clearing bank on the pullback to the 1.31-teens from the mid 1.3370s. Support is at 1.3280 on further pullbacks.
