ECB Withdrawing Support For Banks While Fed Boosts Its Aid

[DailyFx]

The euro was mixed against its most liquid counterparts Monday as a lack of tangible event risk left traders to the range bound and congestive price action that has prevailed in EUR/USD over the past two weeks. However, the lack of day trading opportunities shouldn’t preclude the market’s interest in the day’s fundamentals.



While the economic calendar was clear, comments from ECB council member Yves Mersch have put the spot light back on the central bank. In an interview on Saturday, the central banker said the group was concerned about banks taking advantage of lending efforts to help ease the burden of the credit crunch by dumping their illiquid and depressed securities on the ECB in order to clear their balance sheets. Mersch went on to say the group has already agreed on a number of changes to the existing rules to prevent inappropriate use of the aid going forward. Does this show a renewed sensitivity to the financial side to the monetary policy puzzle that the Fed has often focused on? Time and further rhetoric will tell. Looking ahead to the next 12 hours, event risk traders will need to be on guard. The final reading on third quarter, German GDP numbers may generate little enthusiasm (as there is rarely a significant revision over the previous measurements); but the IFO business and GfK consumer confidence surveys are more timely and therefore volatility worthy. It will be interesting to see how much leverage the drop in crude prices have over both group’s overall attitude on the economic outlook.