21 Jan 2015
EUR/USD reflects expectations ECB will almost double balance sheet - JPMorgan
FXStreet (Bali) - According to JP Morgan's Global FX & Rates Strategy Team, by their estimation, EUR/USD now reflects expectations that the ECB will almost double its balance sheet from €2.2trn to €4trn.
Key Quotes
"The notion that the SNB knew something of ECB policy is a stretch. Central banks have coordinated policy during financial crises, but the current context is not a crisis. It is true that some European central banks have pre-empted ECB moves (like the Danish implementation of negative deposit rates in July 2012), but pre-emption doesn’t imply advance knowledge."
"Rather than guess what was known, suffice it to say that hedgers and investors, both official and private sector, have been responding to thecyclical and policy context (lower oil, weaker inflation, ECB QE) for some time. By our estimation, EUR/USD now reflects expectations that the ECB will almost double its balance sheet from €2.2trn to €4trn."
Key Quotes
"The notion that the SNB knew something of ECB policy is a stretch. Central banks have coordinated policy during financial crises, but the current context is not a crisis. It is true that some European central banks have pre-empted ECB moves (like the Danish implementation of negative deposit rates in July 2012), but pre-emption doesn’t imply advance knowledge."
"Rather than guess what was known, suffice it to say that hedgers and investors, both official and private sector, have been responding to thecyclical and policy context (lower oil, weaker inflation, ECB QE) for some time. By our estimation, EUR/USD now reflects expectations that the ECB will almost double its balance sheet from €2.2trn to €4trn."