Global market wrap: ECB was the main event, dovish - ANZ

Ross J Burland FXStreet

Analysts at ANZ explained that despite the ECB turning more hawkish on policy, markets interpreted the statement as dovish.

Key Quotes:

"The EUR depreciated against all G10, bolstering USD strength. European yields fell across the curve, while the US curve flattened further with 2-year yields flat and 10-year down 2.8bps at the time of writing. The ECB’s interest rate guidance gave European equities a shot in the arm, with Euro Stoxx up 1.4% and other major bourses up 0.8-1.7%. US stocks were more mixed on heavier volumes. The DJIA was down 0.1% and the S&P up 0.2%. The VIX fell to 12.2, down 7%. Oil prices were biased lower after Saudi Arabia’s oil minister said a gradual lift in OPEC output is “inevitable”.

THE END OF AN ERA (ALMOST):

"The ECB has laid the foundations to begin normalisation next year, but the process will be very gradual given below-target inflation and current geopolitical uncertainties. Subject to data flow, the ECB will cut QE in half to EUR15bn from the start of Q4 this year and will end it by December 2018. Interest rates are expected to stay at current levels at least through to mid-2019. The ECB’s outlook for solid underlying growth momentum and building inflation remains intact."

"The interest rate guidance leaves rates on hold through the EU parliamentary elections next May. This is not the first time that policy guidance has covered an election cycle, but that could just be coincidence. The dovish response by markets focused on the rise in geopolitical uncertainties, the downward revision to the 2018 GDP forecast (2.1% vs 2.4%), the ECB’s optionality on policy, and that the ECB is on hold for a year while the Fed is expected to continue tightening."

Author

Ross J Burland

FXStreet

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.

EUR/USD clings to gains around 1.1800

EUR/USD manages to regain composure and retests the 1.1800 region in quite a positive start to the week. The pair’s bounce follows the US Dollar’s offered stance post-SCOTUS ruling ahead of important US data and Fedspeak on Tuesday.

GBP/USD treads water near 1.3500 as BoE-Fed divergence debate stalls

GBP/USD spent Monday spinning in place as market participants await a fresh catalyst to break the pair out of its recent range. The BoE's February hold came with a surprisingly dovish 5-4 split, and UK Consumer Price Index data last week showed inflation easing to 3.0%, reinforcing the case for earlier rate cuts, with most economists now looking to April or March for the next move.

Gold climbs above $5,200 on geopolitical tensions, trade uncertainty

Gold price jumps to around $5,230 during the early Asian session on Tuesday. The rally of the precious metal is bolstered by heightened geopolitical tensions and global trade uncertainty following US tariff decisions. Traders brace for the US January Producer Price Index report on Friday for fresh impetus.

Solana DeFi platform Step Finance to close operations following treasury hack

The Solana based decentralized finance platform Step Finance announced it will end all operations effective immediately following a breach that drained its treasury.

Supreme Court nixes tariffs, Trump teases 15% global tariff

On February 20th, the Supreme Court ruled that Trump’s global tariffs under IEEPA authority were unconstitutional, effectively nullifying the framework. However, the relief was short-lived. Within hours, Trump floated a 15% blanket tariff under an alternative legal authority.

XRP recovers slightly as bearish sentiment dominates crypto market

Ripple is rising above $1.40 at the time of writing on Monday amid fresh tariff-triggered headwinds in the broader cryptocurrency market. The sell-off to $1.33, the token’s intraday low, can be attributed to macroeconomic uncertainty, geopolitical tensions and risk-averse sentiment among other factors.