Midday Brief – Euro currency in focus

The euro currency has been one of the major stories during the European session as the single currency starts to sage to new multi-decade lags as due to a number of factors.

ECB President Christine Lagarde has been out on the wires issuing some more hawkish rhetoric regarding rate increase and way for the central bank to combat inflation.

Large, while speaking at a scheduled speech today said that “We might have to take further measures if inflation not at target when rates at neutral”.

And that the European Central Bank “Wants to reach neutral, will decide then if more action is needed”. The comments hit the euro and Lagarde also touched up QE.

She said that “Quantitative tightening to be considered once rate normalization complete. The Bank is monitoring developments in financial markets very closely in light of the significant repricing of financial assets”.

We are seeing the likes of the EURUSD down, and also the EURGBP pair come-off somewhat, although the euro has had an incredibly lively day against the British pound already.

European stocks are once again in the red, the Stoxx 600 -0.3%, while the German DAX trades down by -0.4% and the French CAC -0.2%. Spain’s IBEX finished down by -0.6%

Strangely enough the Italy MIB closed the day up by +0.9%. News about the new Government being elected in Italy, which is seen as being more to the right is pushing Italian stocks higher.

The most-interesting chart today is the FTSE 100, which has slapped on a huge doji star after breaking a major area of support. The FTSE100 still finished the day in the red.

Today we have also seen talk of intervention from the Bank of England. The markets are pricing that an 85% chance for a 125-basis hike at the next MPC meeting.

The pound and UK bond market wanted a stronger hint on intervention or was scared of the unknown. So the weak intervention has caused more sterling sliding.