EUR/USD (1.4410) The German stock market plunged yesterday, seemingly out of nowhere, and the reason for the selloff is still unclear. Some reports say that there was talk in the market of an impending credit downgrade for Germany, but that was quickly denied by all three rating agencies. Others explained that news of a short-selling ban in Germany raced through Twitter networks, but this information was also debunked. Analysts report that the DAX sales may have been a hedge against positions anticipating the extension of four eurozone countries’ short-selling ban. Meanwhile, market participants are mainly preoccupied with the Jackson Hole speech later today. While the majority no longer expect Ben Bernanke to hint at another round of QE, but we suspect that many market participants are still secretly hoping for one. If they really expect no more monetary easing they would have priced it out of the dollar by now.
Wolfgang Schauble parried Alan Greenspan’s euro pessimism yesterday in Frankfurt. The German finance minister told an audience that the euro isn’t falling apart, and that if he were an American he would be concerned about the state of the US dollar in ten years. The euro tested the 1.4335 support yesterday, but today it has already recovered back to the levels that prevailed at the time of yesterday’s report. The single-currency remains in a consolidation zone between 1.4110 and 1.4515, and a hurdle of the 1.4590 barrier would trigger more upside momentum.
Market Bias Index
There do not appear to be any large stranded position in the run-up before Ben Bernanke’s speech in Jackson Hole. The CAD is likely perceived as a bit undervalued by traders.
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http://www.easyforexnews.net/wp-content/uploads/2011/08/GDPBD00000191325.pdf
Deutsche Bank
Fixed Income Research – Global