Tighten Now to Ease Later?
Even with the December FOMC barely a week away and residual support out there for easing, EURUSD is continuing to defy gravity. Strong LTRO repayment numbers could be announced today at the penultimate window of 2013, possibly leading to even higher numbers next week. Through the month it has become clear that when circumstances are right, a central bank doing nothing is just as powerful for a currency as outright policy action. Although the market is following where the ECB is leading, questions remain as to why the central bank is allowing this to happen as some of the key factors behind the tightening were entirely avoidable.
Read the full report: UBS