Spain held a successful bond auction earlier today, and that, along with upbeat Chinese trade data, has lifted risk appetites across the board.
EUR/USD heads into the ECB press conference on a high note, now at 1.3115.
For the better part of the last month the market has been coming to the view that the worst is behind us in Europe as a result of the ECB’s as-yet-unused safety net, the OMT, being put into place. The success of that backstop has ended the existential threat to the euro but it has not been able to turnaround the still flaccid fundamentals of the European economy.
The ECB will have its hands full today. They can rightly claim victory fro ending the immediate threat of a chaotic collapse in the Spanish and Italian bond markets but they must remain mindful of slow-to-no growth in the euro zone. Without growth, it is very difficult for countries under bailout programs to emerge and it is difficult for countries not under a bailout to stay that way.
Look for Draghi to play the role of two-handed economist today as a result. The market will be attuned to hints of future easing but with the pace of the contraction in Europe appearing to moderate of late, Draghi may offer only vague hints at future cuts rather than telegraphing one directly today.
1.3140 is next resistance for EUR/USD. A smattering of stop-loss buy orders lie above that level.Sell order stretch from 1.3140 to 1.3150, dealers relay.
