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EU are weaker

EU are weaker

Although yesterday’s Long-Term Refinancing Operation saw 800 banks tender for €530 billion from the ECB, equity markets managed to sell-off. The tender was within the range of €400 billion to €1 trillion forecast by economists there seems to be some tension within the ECB over the collateral used in the operation with Bundesbank President Weidmann reportedly writing to Draghi to demand that collateral rules are tightened-up.

The euro slipped lower against the dollar overnight falling from $1.3450 to find support at $1.33. The fact that the ECB’s balance sheet will expand to up to 35% of GDP after the LTRO can be seen as a loosening of monetary conditions that should send the euro lower. With Fed Chair Bernanke avoiding any hint of further Quantitative Easing in his semi-annual testimony yesterday, the dollar should extend its gains against the single currency, especially as the flow of data today looks to be in favour of the US.

Reaching its lowest 2012 price last week, at 1.4177, the GBP/CHF bounced back. A stronger upside movement was seen yesterday towards 1.4400 level but the GBP/CHF finding hard Today’s strong UK nationwide housing prices pushed the pair higher to 1.4413.

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