So today Europe is under spotlights as the ECB is gathering and announcing its Monetary Policy Stance [EURUSD: 1.1206].
The base case scenario expected by the market is a top up of the PEPP program through an increase of 500 billion bonds buying and an extension through 2021; references to a weak inflation and a relevant slowdown of the economy are the other factors currently priced in by the market.
Any reference to a worst scenario that the one described -and the eventuality of not increasing the assets purchase program- should push EURUSD lower; in the case Mrs Lagarde will surprise with an optimistic statement and Q&A session, this could be quite bullish for EUR, giving it wings for a further leg up toward somewhere between the 1.1315 and 1.1430 area.
ECB Balance Sheet
Also notice that last night Germany has approved a further 130 billion Euro fiscal rescue package and -as the markets are said to be driven by an invisible hand that makes them a great discounting mechanism- this explains somehow the great last week performance of European indices, from EuroStoxx to Dax.
We spoke yesterday about the USD weakness, that is the most interesting catalyst in the market right now: would like to add a new point, related to US Bonds, the biggest USD denominated Fixed Income market.
The 30 Years US Treasuries is looking to be breaking to the upside the after Covid shock range (1-20% – 1.45%) and is now trading at 1.544%: consider that a higher yield means the security is sold in the market. Also the 10 Y US finds itself in a similar situation, without having broken the range yet. Should this be confirmed, pay a lot of attention to 97 in USD Index and scrutiny all EM currencies (they could keep on appreciating).
US 30y Treasuries
Finally, for today and next days, keep an eye also on OIL, as the monthly OPEC meeting has been delayed and there’s some rumors of disagreement about how the production cuts have been implemented till now by the several countries members of the cartel.