Market news

Show news:


20.08.2019 19:39

USD/EUR spread compression trade seems to be alive and kicking – Nordea

Andreas Steno Larsen, the analyst at Nordea Markets, believes that markets have so far also chosen to price in more cuts from the Fed than the ECB, even though the Euro-area outlook is probably worse than the US outlook, both on the growth and the inflation front and is simply a result of differing starting points.

  • “The Fed simply has room to cut (materially), while it is much more exhausting for the ECB to convince the public of the need for more cuts even deeper into negative territory (with that said, we expect them to cut rates). The USD/EUR spread compression trade could continue to work based on this relatively simple line of thought.
  • Furthermore, we have noted how the Fed rarely (if at all) underdelivers versus market expectations of cuts. It can be too expensive not to deliver the expected cuts as the Fed risks to tighten financial conditions abruptly in that case. From a risk/reward perspective, it continues to make sense to bet on the Fed delivering (at least) what is priced in.
  • Hence, USD hedge costs have likely already peaked last year as the Fed can “outcut” the ECB over the coming quarters, which will continue to compress short-end USD/EUR spreads as a consequence.
  • But this is not a green light for USD depreciation pressure as the rate spread is not a particularly good predictor of EUR/USD spot moves. We have a target of 1.08 for EUR/USD at the end of the year due to continued trade and growth tensions.”


Keep up with latest Forex market news updates: Currencies, central banks, economic indicators for oil and gold trading – all you need to work effectively on Forex.

Market focus

  • White House economic adviser Kudlow: U.S. and China "very close" on opening of financial markets
  • Chinese vice foreign minister says progress made in trade talks with U.S
  • BoE reform needed to boost firepower for downturns - think tank
  • Earnings Season in U.S.: Major Reports of the Week
October 2019
  • 2019
  • 2018
  • 2017
  • 2016
  • 2015
  • 2014
  • 2013
  • 2012
  • 2011
  • 2010
  • 2009
  • 2008
  • 2007
  • 2006
  • 2005
  • 2004
  • 2003
  • 2002

Forex is open 24 hours a day, 5 days a week (except national holidays), and it can be broken up to the following four regional markets: Australia and Oceania, Asia, Europe, and America. A Forex trading session opens at 23:00 GMT on Sunday in Japan and closes at 22:00 GMT on Friday in the USA.

 
Session Financial Centres UTC/GMT
OpenClose
EET
OpenClose
Local Time
OpenClose
Pacific Wellington 19:00 04:00 22:00 07:00 22:00 07:00
Session Financial Centres UTC/GMT
OpenClose
EET
OpenClose
Local Time
OpenClose
Sydney 21:00 06:00 00:00 09:00 00:00 09:00
Session Financial Centres UTC/GMT
OpenClose
EET
OpenClose
Local Time
OpenClose
Asian Tokyo 23:00 08:00 02:00 11:00 02:00 11:00
Session Financial Centres UTC/GMT
OpenClose
EET
OpenClose
Local Time
OpenClose
Hong Kong, Singapore 00:00 09:00 03:00 12:00 03:00 12:00
Session Financial Centres UTC/GMT
OpenClose
EET
OpenClose
Local Time
OpenClose
European Frankfurt, Zurich, Paris 06:00 15:00 09:00 18:00 9:00 18:00
Session Financial Centres UTC/GMT
OpenClose
EET
OpenClose
Local Time
OpenCloseе
London 07:00 16:00 10:00 19:00 10:00 19:00
Session Financial Centres UTC/GMT
OpenClose
EET
OpenClose
Local Time
OpenClose
American New York 12:00 21:00 15:00 00:00 15:00 00:00
Session Financial Centres UTC/GMT
OpenClose
EET
OpenClose
Local Time
OpenClose
Chicago 13:00 22:00 16:00 01:00 16:00 01:00