Daily Market Review - 09/12/2014

EUR/USD

So in the end of the day we see a symmetrical triangle, which is one of the most reliable patterns suggesting consolidation. The rate is approaching the apex, that is why consolidation will end soon with resumption of downward pressure.

USD/JPY

The rate has risen past 107.0. Now it is on the way up to test next upward goals at 108 and 109. The rate is now at highest levels since the first half of 2011.

GBP/USD

The Pound has bounced back up well and turned out to be a reversal at least in the short term. Therefore in the near term we expect to see continuation of upward move.

Market Overview

While the ECB is preparing to launch a program of assets purchasing (ABS), controversies within the EU zone still remain. Paris and Berlin in accordance with Bloomberg have refused to give the ECB a guarantee for risky ABS; consequently the range of available securities for the regulator is shrinking.

As a reminder: last meeting Draghi announced the beginning of ABS purchase along with rate decrease.

The irony in all that situation is that the beginning of the current crisis roots back to mortgage ABS, which somehow got high rating in the States and eventually made global economy plummet. Basically because of that Draghi emphasized, that the ECB would buy only quality assets, but it is not clear who will guarantee that the crisis won’t resume in the EU.

The main concerns of Germany and France, whose combined report had been prepared before the ECB decision announced, is in potential idleness of investors. As if they can waste all vigilance, relying on regulator guarantee. In other words there is risk of new bubble emerging, which can burst, if the level of credits expiration will start growing again.

Berlin starts to come back to its prior position, insisting that stimulating programs soften the pressure on national governments. Because of that the pace of reforms is slowing down. For instance the majority of plans on budget deficit contraction have remained unfulfilled.

Recently Paris has informed about the shift of the deficit goal at the level of 3% of the GDP two years forward up to 2017. In accordance with French ministry of finance the figure will constitute 4.3% next year. It is quite reasonable, that the main issue was low inflation, and as a result weak economic growth.

Economic Calendar

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