20 Jan 2015
EUR/USD in consolidation mode around 1.1600
FXStreet (Córdoba) - EUR/USD is going through a phase of consolidation on Tuesday, with economic data failing to trigger moves, as market’s attention is being absorbed by the European Central Bank meeting, which will take place on Thursday.
EUR/USD briefly rose above the 1.16 mark and reached a high of 1.1614 before sliding back to the 1.1570 support zone. Having shrugged-off better-than-expected German ZEW data, EUR/USD has spent the day in a tight range and was last at 1.1601, little changed on the day.
The euro has recovered from an 11-year low of 1.1459 struck on Friday in the aftermath of the Swiss National Bank surprise decision to remove the EUR/CHF floor and amid expectations the ECB will announce a QE program at its first meeting of the year next Thursday.
ECB QE will be a drag on the EUR
“The median expectation is for EUR 550bn in asset purchases which suggests the ECB will have to dive deep into the toolkit to surprise the markets”, said the TD Securities team.
"An aggressive response (scale, timing) is a strong possibility, we think, and would likely do more immediate harm to the EUR exchange rate than something more in line with the middle of the road estimates", they added. "Even if the EUR does manage a trading bounce on the back of a 'sell-the-mystery, buy-the-history' type market reaction, we do not think the rebound will extend too far or for too long. QE will still be a drag on the EUR’s overall performance moving deeper into 2015, especially as policy prospects between the US and Eurozone are diverging conspicuously".
EUR/USD briefly rose above the 1.16 mark and reached a high of 1.1614 before sliding back to the 1.1570 support zone. Having shrugged-off better-than-expected German ZEW data, EUR/USD has spent the day in a tight range and was last at 1.1601, little changed on the day.
The euro has recovered from an 11-year low of 1.1459 struck on Friday in the aftermath of the Swiss National Bank surprise decision to remove the EUR/CHF floor and amid expectations the ECB will announce a QE program at its first meeting of the year next Thursday.
ECB QE will be a drag on the EUR
“The median expectation is for EUR 550bn in asset purchases which suggests the ECB will have to dive deep into the toolkit to surprise the markets”, said the TD Securities team.
"An aggressive response (scale, timing) is a strong possibility, we think, and would likely do more immediate harm to the EUR exchange rate than something more in line with the middle of the road estimates", they added. "Even if the EUR does manage a trading bounce on the back of a 'sell-the-mystery, buy-the-history' type market reaction, we do not think the rebound will extend too far or for too long. QE will still be a drag on the EUR’s overall performance moving deeper into 2015, especially as policy prospects between the US and Eurozone are diverging conspicuously".