The euro, which has advanced for five consecutive sessions coming into today, is slightly lower after it stalled yesterday as it approached last year's high set in September near $1.2090, explains the research team at BBH.
“Yesterday was also the third consecutive close above the upper Bollinger Band, which is found today near $1.2060. There is a 950 mln euro option struck at $1.2030 that expires today. There is also a $1.1960 strike (518 mln euros) that will also be cut, but less relevant.
Some had linked the euro's gains yesterday and the sharp backing up of European yields to comments from ECB officials (Nowotny echoing remarks by Coeure and Mersch). They suggested that as the eurozone economy continues to do well, the ECB's asset purchases will end this year. We saw little new in these comments. They strike us a reiteration of ECB policy.”
“European bond yields are lower today, with Italian and Spanish benchmark 10-year yields off four-five basis points. We see risks ahead that may encourage the ECB to taper the 30 bln euro purchases further in Q4 17. These include the early prepayment of TLTRO funds (near midyear), which will reduce the ECB's balance sheet, Greece's aid program ending, and, perhaps, lingering political uncertainty (Italy? Germany?).”
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