|

Funda-FX wrap: all eyes turning towards inflationary risks, ECB to address QE next week

Funda-FX today was lighter on Wednesday in terms of the bulk of headlines, but, again, it was mostly about the ECB today. 

Four ECB members, including the ECB's chief economist Peter Praet, who wrote in a published speech, that the 14th June meeting will hold discussions on ending their asset purchase program.

On Tuesday, Bloomberg reported that sources had hinted to such discussions taking place next week which sent traders looking for a bargain in European assets, sending the euro from the 1.1650's to 1.1739 the high in NY trade. That rally extended on the confirmations today to a few pips shy of the 1.18 handle and the highest level since 22nd May this year. 

Analysts at Westpac explained that the yields on bonds that are currently benefiting from ECB buying rose sharply, including +10bp in France and the Netherlands, +14bp in Italy (10 year bonds) causing a spillover to the likes of the UK, where the 10 year gilt yield rose 9bp.

Elsewhere, Italian politics took a backseat and instead there was quite a stir from across the Channel where fears of the UK government losing traction on the recent progress made towards finalisations of the PM May's plan for the Irish backstop before the European Council meeting on June 28-29. However, "Mr Davis was furious to discover that the draft plan — drawn up by Mrs May’s chief Brexit official Olly Robbins — did not include an end date to make it clear that any emergency measures to ensure a smooth Irish border were temporary," an FT article explained. This news sent the pound on the offer from previous highs of 1.3443. 

Then, there were headlines that struck the Candian dollar that had otherwise fared well on trade data, relating to economic penalties against Canadia, despite the recent reports that the US TS had asked Trump that Canada would be exempted from tariffs on steel and aluminium imports. 

Key headlines:

Author

Ross J Burland

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

More from Ross J Burland
Share:

Markets move fast. We move first.

Orange Juice Newsletter brings you expert driven insights - not headlines. Every day on your inbox.

By subscribing you agree to our Terms and conditions.

Editor's Picks

EUR/USD flat lines near 1.1750 ahead of ECB policy decision

EUR/USD remains flat after two down days, trading around 1.1750 in the European session on Thursday. Traders move to the sidelines and refrain from placing any fresh directional bets on the pair ahead of the ECB policy announcements and the US CPI inflation data. 

GBP/USD stays defensive below 1.3400, awaits BoE and US CPI

GBP/USD oscillates in a narrow band below 1.3400 in European trading on Thursday. The pair trades with caution as markets eagerly await the BoE policy verdict and US consumer inflation data for fresh directional impetus. 

Gold awaits weekly trading range breakout ahead of US CPI report

Gold struggles to capitalize on the previous day's move higher back closer to the $4,350 level and trades with a mild negative bias during the Asian session on Thursday. The downtick could be attributed to some profit-taking amid a US Dollar uptick, though it is likely to remain cushioned on the back of a supportive fundamental backdrop. 

BoE set to resume easing cycle, trimming interest rate to 3.75%

The Bank of England will announce its last monetary policy decision of 2025 on Thursday at 12:00 GMT. The market prices a 25-basis-point rate cut, which would leave the BoE’s Bank Rate at 3.75%.

US CPI data expected to show inflation rose slightly to 3.1%, cooling Fed rate cut bets for January

The US Bureau of Labor Statistics will publish the all-important Consumer Price Index (CPI) data for November on Thursday at 13:30 GMT. The CPI inflation in the US is expected to rise at an annual rate of 3.1% in November

Dogecoin Price Forecast: DOGE breaks key support amid declining investor confidence

Dogecoin (DOGE) trades in the red on Thursday, following a 4% decline on the previous day. The DOGE supply in profit declines as large wallet investors trim their portfolios. Derivatives data shows a surge in bearish positions amid declining retail interest.