An ECB spokesperson said that “the Governing Council will have an ad-hoc meeting on Wednesday to discuss current market conditions” and that surely refers to the bond market rout in Europe, which has seen Italian yields explode and spreads widen considerably in the past week.
The central bank didn’t offer any hints about dealing with fragmentation risks on Thursday last week and that has seen a major selloff in regional bonds, especially the peripheries. Showing a lack of urgency isn’t going to resolve that and we’re finally seeing the ECB step up to let the market know that they are watching.
It will be interesting to see what detailed solution they can offer to address the risks of fragmentation at this point, beyond what Schnabel offered up yesterday here.
For now at least, the market is listening that maybe policymakers will do something about it. The euro caught a bit of a pop with EUR/USD
EUR/USD
The EUR/USD is the currency pair encompassing the European Union’s single currency, the euro (symbol €, code EUR), and the dollar of the United States (symbol $, code USD). The pair’s rate indicates how many euros are needed in order to purchase one dollar. For example, when the EUR/USD is trading at 1.2, it means 1 euro is equivalent to 1.2 dollars. Why the EUR/USD is the Most Popular Trading PairCompared to all tradable currencies, the euro (EUR) is the world’s second most traded currency, behind only the US dollar. This currency pair is the most traded and liquid currency pair on the market.As the most popular trading pair, the EUR/USD is a staple of every brokerage offering and often has some of the lowest spreads relative to other pairs. Ultimately, the currency follows the two most economic blocs in the world and sees the most volume for this reason.The EUR/USD has a wide range of factors that influence its rates. From the EUR side, economic data in the Eurozone as well as internal factors in the bloc can easily impact rates. Even small member states can effectively weigh on the EUR, as seen in Greece during bailout talks in the 2010s. Alternatively, developments in the United States and the Federal Reserve commonly affect the EUR/USD. Many examples include the bailouts during the Financial crisis, tax cuts during the Trump Administration, and Covid-19 relief measures, among others.
The EUR/USD is the currency pair encompassing the European Union’s single currency, the euro (symbol €, code EUR), and the dollar of the United States (symbol $, code USD). The pair’s rate indicates how many euros are needed in order to purchase one dollar. For example, when the EUR/USD is trading at 1.2, it means 1 euro is equivalent to 1.2 dollars. Why the EUR/USD is the Most Popular Trading PairCompared to all tradable currencies, the euro (EUR) is the world’s second most traded currency, behind only the US dollar. This currency pair is the most traded and liquid currency pair on the market.As the most popular trading pair, the EUR/USD is a staple of every brokerage offering and often has some of the lowest spreads relative to other pairs. Ultimately, the currency follows the two most economic blocs in the world and sees the most volume for this reason.The EUR/USD has a wide range of factors that influence its rates. From the EUR side, economic data in the Eurozone as well as internal factors in the bloc can easily impact rates. Even small member states can effectively weigh on the EUR, as seen in Greece during bailout talks in the 2010s. Alternatively, developments in the United States and the Federal Reserve commonly affect the EUR/USD. Many examples include the bailouts during the Financial crisis, tax cuts during the Trump Administration, and Covid-19 relief measures, among others.
Read this Term still being defended near 1.0400 this week but the 23.6 retracement level at 1.0485 is likely to limit gains ahead of the Fed.
If there aren’t any significant details offered up by the ECB in this meeting, I reckon we can see the selling continue again in Italian bonds as the jitters will continue to grow in the months ahead.
www.forexlive.com