Euro Recovers as ECB Holds Line on Rates and Policy

| Thursday, 3 May 2012 16:26
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(eToro Blog) Earlier today, the ECB announced that its benchmark rate of 1% would be unchanged, in line with expectations, and investors were clearly anxious to hear the bank’s stance now given the most recent economic data, for a clue to how and when the central bank intends to address the economies’ retrogression. At the customary press conference which followed, ECB chief Mario Draghi said downside risks were impacting the economic outlook, with the most recent data highlighting the prevailing uncertainty.

After the press release, the EUR/USD slipped to 1.3131 and sentiment on OpenBook swung decidedly bullish. OpenBook trader andreaallegrucci from Italy has only been trading for the past few months, but very successfully as the trader has already earned 2 copiers and 11 followers. Within the portfolio, the EUR/USD pair is exclusively traded, which has resulted in a 79.8% gain of 22 trades executed. For the week, the trader’s P&L is 2.8%, for the month it is at 14.3% and over the quarter it is at 217.7%.

While economists polled had not been expecting the ECB to cut interest rates, Mr. Draghi’s argument of earlier this year that the Eurozone was on the verge of recovery could certainly be considered an optimistic and premature analysis. More recently, he’s stepped back somewhat from the fight against inflation as the bank’s number one priority, and hinted that the economic outlook might be deserving of more consideration. During the question and answer period he specifically said that growth has to be put back to the center of the agenda.

The EUR/USD had been under pressure ahead of the ECB announcement, as much a factor of disappointing economic data as the outcome of the Spanish bond auction. Today Eurostat reported that producer price inflation showed a decline to 3.3% in March on an annualized basis, and follows yesterday’s dismal PMI and unemployment data. Investors had hoped that that news, along with rising bond yields in today’s Spanish auction, would have been the straw which broke the ECB’s back as regards the possibility of another LTRO. Mr. Draghi said that the previous two operations still need to be assessed as they have not yet worked their way fully through the financial system.

The pair not only recovered but pushed higher to 1.3173 as the press conference drew to a close once investors realized that additional easing was not yet visible in Mr. Draghi’s crystal ball. OpenBook guru pyruss profitably closed a short position in the pair earlier, but it is his several open and profitable longs that are inching towards their respective TP which is surely holding this guru’s 678 copiers in thrall. More than 85% of this guru’s portfolio is devoted to the EUR/USD pair, with a nearly 1% gain in six months indicating that this guru and his followers are more than content to scalp small profits of this most volatile of pairs.

Copyright 2012 eToro Blog

Note: Past performance is not an indication of future results. This post is not investment advice. CFD trading bears risk to your capital.
| Thursday, 3 May 2012 16:26
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513
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