FXstreet.com (Barcelona) - The improvement in broader financial market sentiment and
risk appetite seen across a range of assets through September and October appears to have reached a limit for now.
According to the NAB Research Team, “We view that the significance of the ECB OMT bond buying program and Fed open-ended QE announcements, together with a run of improved US economic data and signs of stabilization in China are sufficient to provide a floor for a range of markets at higher or tighter levels that was seen in the more gloomy period between April and August.”
In turn, “that implies any pushes back against risk ought to be limited unless they are founded on undisputed and tangible reasons that suggest the aforementioned supportive factors are being called into question.” the team adds.
We can break these down in order of significance with the improvement in Chinese and US data as more supplementary and supportive of the other two; open-ended Fed QE and ECB OMT. “Moreover, we would place a premium on ECB OMT as being of more significance and importance in terms of its ability to stabilize markets via a reduction in Euro Zone tail risks. So as long as the reasons for risk pullbacks do not credibly threaten these positive developments we will remain positive.” they portend.
On the threat to Euro Zone tail risks one factor is just emerging. Discussions on Greece getting its next bailout disbursement (EUR31bn needed by mid-November to avoid default) and then a two-year extension on existing bailout terms have hit two problems.
In turn, “that implies any pushes back against risk ought to be limited unless they are founded on undisputed and tangible reasons that suggest the aforementioned supportive factors are being called into question.” the team adds.
We can break these down in order of significance with the improvement in Chinese and US data as more supplementary and supportive of the other two; open-ended Fed QE and ECB OMT. “Moreover, we would place a premium on ECB OMT as being of more significance and importance in terms of its ability to stabilize markets via a reduction in Euro Zone tail risks. So as long as the reasons for risk pullbacks do not credibly threaten these positive developments we will remain positive.” they portend.
On the threat to Euro Zone tail risks one factor is just emerging. Discussions on Greece getting its next bailout disbursement (EUR31bn needed by mid-November to avoid default) and then a two-year extension on existing bailout terms have hit two problems.
