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Reopening amid Delta variant surge deepens contradictions in global economy
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ECB struggles to marry its outlook to the market s mood
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Following
3/12/2021 8:01:35 AM GMT
EUR/USD has been on the back foot as US yields lift their head again.
The ECB s front-loading of bond-buys has failed to convince markets.
Europe s vaccine issues are also pointing to losses.
Friday s four-hour chart is showing bears are gaining ground.
Time to give back weekly gains? EUR/USD has been retreating from the highs and may have substantially more room to give up previous gains as the week draws to a close.
There are three fundamental downside drivers:
1) US yields have ended their correction
Returns on US debt remain the main market driver – and when they rise, the dollar moves higher as well. The rise in
Mar 12, 2021 08:33 GMTOpinions
The ECB has left its policy unchanged and vowed to ramp up bond-buying next quarter.
Potentially lower European yields may weigh on the currency.
The lack of commitment to longer-term support means fewer funds for the economy.
Christine Lagarde’s largesse is gone – at least for the long-term – and that is bad news for euro bulls. European Central Bank President Christine Lagarde has overseen an announcement to expand bond-buying in the second quarter.
That pledge has come after the bank surprisingly purchased fewer bonds in recent weeks – a surprise given officials’ complaints about rising yields. If the bank indeed ramps up its bond-buying activities and returns on debt fall, that could weaken EUR/USD. On the other side of the Atlantic, the Federal Reserve accepts higher yields as a sign of better growth prospects.
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