Euro Tests 1.27
After a subdued opening, the euro and other risk assets came under pressure. While the move was largely stop-loss driven, comments by David Riley, the head of sovereign ratings sparked some selling. Riley said that the ECB must step in to prevent a ‘cataclysmic’ collapse of the euro. This statement is in line with Fitch’s view that the ECB must increase its purchases via the SMP program in order to help control the crisis and is no real change in stance. This move followed a strong German auction and in-line German GDP numbers. After a series of comments from Fed members over the past week, Chicago Fed President Evans is due to speak. He has already appears to have made up his mind on the issue of QE though – he has consistently been the most dovish FOMC member, and dissented in favour of additional easing at the Dec. 13 FOMC meeting. We expect to hear further calls for action when he speaks later today. Given that his views are well known, that he is no longer a voting member, and that the focus remains on events in Europe, we very much doubt his views will hurt the dollar. Lockhart and Plosser are also due to speak, while the Fed’s Beige Book will give an indication of the general views held within the Fed.
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