Change Language ▼
CFDs and spread bets are complex instruments and come with a high risk of losing money rapidly due to leverage.71% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Financial market research and analysis
Our analysts have their fingers on the pulse of the world's financial market news.
Spread betting and CFD trading are high risk and may not be suitable for everyone. You can lose all your deposits.
30 Nov 2015
By Ipek Ozkardeskaya
Draghi has certainly more in its hat
The move in the Swiss franc has been the major event in the foreign exchange market last Friday. The EURSEK took a five-figure dive to 9.2158 this morning. Central banks are certainly behind the scene before the Dec 3rd ECB meeting. Given that the ECB is expected to expand its QE program and also cut the deposit rates into deeper negative territory, Riksbank and the SNB seem willing to play proactively to prevent an undesired appreciation in the krona and the franc.
The fact that the SNB and Riksbank acted one after the other, hints at a potentially major action from the ECB. The last time the Swiss National Bank had proactively cut its rates into negative territories, the ECB had followed with the launch of the Quantitative Easing Program. We shall now hear some more whistles in the headwinds from Sweden and Switzerland.
The level of pre-ECB stress suggests that the European Central Bank may have more in its hat.
The market expects a 20-to-40 basis point cut from the ECB and an expansion of monthly bond purchases from 60 to 75 billion euros. Given that the ultra-dovish expectations are already priced in, the euro could well appreciate should the ECB fail to satisfy the market appetite for more cash. The market may have gotten well beyond itself given that the expectations for the rate cut has deepened from a 10 basis points to 20-40bp cut presently. In this sense, the ECB may have been trapped in its credibility and may simply be forced to jump as high as the hurdle.
The question is, how dovish could Draghi go to avoid a EUR appreciation?
The information and comments provided herein under no circumstances are to be considered an offer or solicitation to invest and nothing herein should be construed as investment advice. The information provided is believed to be accurate at the date the information is produced. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Please note that 71% of our retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing money.
