The last week proved to be a mixed bag of results, as the European Central Bank’s (ECB) decision to begin bond purchases from March and the movement in the US Treasury yields was well anticipated. However, recovery in the GBP/USD pair fell approximately 50 pip short of the expected level, while the view on USD index failed as it extended rally to 95.00 levels.
Our reports under macro scan titled “US Treasury yields set to weaken further, GBP/USD likely to test 1.5260â€(our macro scan report dated Jan 20th.) and “USD Index – risk of correction to 92.00-91.50 levels in short-term†(our macro scan report dated Jan 21st.), were anticipating that the ECB would fail to surprise markets with respect to the size and duration of the QE, thereby triggering a bout of profit booking in the USD. However, the ECB’s 1 trillion Euro big bazooka surprised markets, thereby pushing EUR to 11-year lows against the USD.
Furthermore, the drop in the EUR/USD also capped recovery in the GBP/USD pair at 1.5213 – approx 50 pip short of the expected 1.5260 levels, post which cable fell below 1.5 levels.
Moreover, the view on the USD index failed as it was primarily based on the expectation that the ECB would disappoint markets. However, we did mention in the report (our macro scan report dated Jan 21st.), that a surprisingly big stimulus program may push the USD to 94.50 levels.
Meanwhile, the movement in the 10-year treasury yield (our macro scan report dated Jan 20th) was well anticipated. As expected the gains in the 10-yr yield were capped just below 1.96%, post which the yields resumed the fall. Given the yield is back below 1.8%, a downside of 1.62% can still be expected.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.