ECB exceeds expectations

The ‘buy dollars, wear diamonds’ theory gains further traction as Super Mario, albeit a little late to the game, exceeds market expectations with the details on sovereign QE measures. Total purchases will be made at a rate of €60 billion per month with a minimum target date of September 2016. However, there has been interpretations that that QE could become open ended as the ECB President emphasised the 2% inflation mandate along with the governing councils concerns with regards to the medium term inflation outlook.

Looking ahead, it’s possible  for the FOMC to deliver a curve ball next week by adopting a dovish stance in line with the recent Central Bank mantra, as surely the US power house can’t be immune to downturns in oil prices and inflation expectations. I’m not going argue that divergent monetary policies and widening GDP differential between the US and the rest of the world isn’t going to lead to increasing investment flow into the US on a longer term basis, but for next week I believe caution is warranted on a summer Fed hike.

The sad news of Saudi King Abdulla passing caused a $2 rally in oil prices, before his half-brother King Salman was announced his successor. King Salman is deemed to share a similar policy stance to his late brother. Having recently spent some time in Saudi Arabia, I learnt of the admiration and gratitude the Saudi people have for the infrastructure King Abdulla implemented in Saudi Arabia.

The Greek elections this weekend has the market expecting that Greece will now be led by Syriza Government. This fits in with comments made yesterday that Greece could qualify for the ECB bond purchase program, providing certain conditions are fulfilled. But as a coalition is formed, it will be the run on deposits and the effect this will have on the Greek banking system that will be the focus of  the market’s attention.

EUR/USD
Supports 1.1210-1.1150-1.1000   | Resistance  1.1315-1.1375-1.1440

USD/JPY
Supports  117.80-117.50-116.85 | Resistance  118.80-119.30-120.80

GBP/USD
Supports  1.4950-1.4915-1.4830 | Resistance  1.5030-1.5080-1.5135