ECB Quick Analysis: Why this may be a selling opportunity on EUR/USD

EUR/USD has jumped on the high interest rate attached to the ECB's new funding scheme.
Markets have ignored the pushback on interest rates.
The euro may turn down, providing a selling opportunity.

Yohay Elam FXStreet

Follow all the developments in the ECB live coverage

The European Central Bank has surprised markets by announcing a relatively high interest rate on the new funding scheme – 10 basis points above the deposit rate. The terms of this TLTRO program have sent the euro higher as markets ignored the pushback in the guidance regarding interest rates.

The ECB has now pledged to keep interest rates low at least through the first half of 2020 – no less than six months – a substantial dovish tilt from a central bank that has negative interest rates.

And additional adverse news may still come.

ECB President Mario Draghi has often painted a dark picture of the euro-zone economies and also of the global one. He may highlight the risks of trade wars – or protectionism in his jargon. A dovish message will probably be accompanied by a downgrade of economic forecasts from the Frankfurt-based institution's staff.

And even if Draghi refrains from rocking the boat – it is already sinking. Once the dust settles, markets may realize that the bank is set to keep its ultra-loose monetary policy for longer and may even opt for renewing Quantitative Easing it worked so hard to conclude last year.

All in all, there is more negative than positive in the ECB's decision – and euro bulls could pay the price.

Author

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

GBP/USD stays offered near 1.3370

GBP/USD remains on the back foot, slipping back toward the 1.3370 zone on Tuesday. Cable has come under pressure soon after testing the 1.3400 neighbourhood as investors turned more cautious in response to renewed effervescence on the geopolitical front.

EUR/USD stays offered below 1.1450

EUR/USD remains on the back foot ahead of the opening bell in Asia, returning to the low-1.1400s on the back of the resurgence of the demand for the US Dollar. Indeed, renewed jitters in the Middle East support the safe haven universe and weigh on the sentiment surrounding the risk complex. Moving forward, investors’ attention should shift to Wednesday’s FOMC Minutes.

Gold weakens toward $4,100

Gold adds to Monday’s decent pullback and trades close to the $4,100 mark per troy ounce on Tuesday. In the meantime, fresh geopolitical effervescence appear to have reignited inflation concerns, which in turn, limit any recovery attempt from the precious metal.

Ondo launches Perps with 20x leverage on tokenized stocks

Ondo Finance has expanded its financial services suite to include perpetual futures contracts for tokenized stocks. The platform, referred to as Ondo Perps, will provide 24/7 trading and over 20x leverage, utilizing tokenized stocks as collateral.

Bye, forward guidance: How to trade when central banks choose silence

Central banks have spent years telling markets what might come next. Now, traders face the possibility that they say a lot less. From the Federal Reserve to the European Central Bank and the Bank of England, policymakers are pushing back against forward guidance, arguing that the current world demands more flexibility.