The recent speech from Draghi that the ECB will be purchasing asset-backed securities near mid Oct had caused a incline in Euro against USD. Why did the Euro went up against the USD instead of declining? IMO, spending more on asset-back securities will cause it’s interest rate to lose value and eventually cause it’s currency value to go down. But why do speculators go on a long position instead? Can any1 enlighten me pls??
Hello SXSXSX,
Actually, there was an increase of about 70 pips after the ECB Press Conference. However, the situation in the euro-zone is not that positive, and the price started a new decrease after it met SMA 150.
Anyway, stay tuned for the US Non-farm Payrolls and the US Unemployment Rate, which would be released in 5 minutes. They are very likely to bring volatility.
The NFP rate went exceptionally well which drives the usd further down. However, I have already closed my position at a losing rate b4 the announcement of NFP :(((. Can I know wat is the net long effect for quantitative easing/government bond buying??
The market has been factoring in the coming ECB monetary stimulus so it comes as no surprise, therefore it’s not unreasonable that it wouldn’t cause the euro to decline based solely on these news. Furthermore, Draghi was very non specific, he did not specify anything as to the size of the program, it’s quite possible that the market will be waiting to see the actual specifics and details of the QE before ruling on it’s impact on the Euro-zone economy and consequently on the Euro.
Beyond that, the inclines and declines of a currency pair depend on both currencies, hence both economies. As long as the the market sentiment will remain bullish on the dollar, and the market will read the US data as positive (even though I personally think that is very arguable) then you can rest assured that it’ll be hard for the Euro to muster any substantial increase, we’ll see corrections and rallies in the eur/usd like in any bear market of course, but that is all they will be.