Currencies: 11Apr As we have mentioned in past comments, the “aurthorities” will make forays into the traded markets to prevent collapse. Today’s permutation on that theme is the ECB jawboning on Spanish debt. An ECB Board member intimated the ECB would be willing to buy Spanish debt to lower borrowing costs. It accomplished just that by the market interpreting this statement as a willingness to intervene. It bid up the Spanish Bonds, thereby lowering borrowing costs. This is an example o how the Central Banks are using more than actual monetary policy execution, but also the power of the press to change market conditions. With the ECB’s “safety net” now public, the Euro rallied of its negatively biased Trend.
This effect is maximized as the US Fed is now in a situation where another round of QE is being publicly debated.
This is another example of our common theme of the push-pull of the European and American debt/economic situations trading places on the front burner.
Risk-off trading will still tend to favor the USD and Japanese Yen.