Details of potential stimulus by the ECB guides EUR below the key psychological 1.0600 level to reach its lowest since April
Price action today stemmed from reports by monetary officials suggesting that staggering charges on banks hoarding cash is among the potential options being considered for the ECB meeting next week, while also suggesting that other options include purchasing further debt. The details of what further stimulus would entail saw EUR grind lower throughout the session, with next Thursday’s ECB meeting looking more and more likely to garner action from the central bank. Of note, the most likely form of stimulus as well as the above is a deposit rate cut of at least 10bps, an expansion of QE program by 6-12 months or the pool of eligible securities could be expanded, most likely in terms of regional government bonds, but also with the option open of more radical options.
In terms of the price action, EUR/USD fell throughout the morning to reach its lowest level since April; however, losses were capped by large touted bids at 1.0577 and 1.0574. USD gained from the EUR weakness to see the USD-index break above the 100.00 handle and fall just short of the March high, with the greenback strength filtering through to see gains in both USD/JPY and USD/CHF.
In terms of today’s scheduled events, despite a heavy schedule, the actual impact was fairly minimal. The UK Autumn statement did see some equity specific consequences, but failed to see a sustained reaction in GBP, while a large number of US data releases were provided from the US ahead of the Thanksgiving holiday tomorrow. However, the sheer quantity of releases saw the significance of the data lessened, with the most notable data release coming in the form of US Durable Goods Orders (3.00% vs. Exp. 1.70%).
Looking ahead, due to the aforementioned Thanksgiving holiday, tomorrow could be a more subdued session, with the notable highlights of the day coming in the form of Japanese CPI and comments from ECB’s Linde and Visco.