Euro Exchange Rate Today: EUR Outlook to be Determined by MRO and SMP News Today
- Written by: Gary Howes
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The euro rate is today feeling the pressure as a lack of data ensures there is little reason to back the shared currency.
The euro is currently on the backfoot across much of the marketplace:
- The euro dollar exchange rate is slightly lower on a daily basis at 1.3560.
- The euro pound exchange rate is 0.49 pct lower at 0.8189.
- The euro Australian dollar exchange rate is 0.77 pct lower at 1.5284.
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What is driving the outlook for the euro today?
Attention today will be More attention will be fixed on the ECB’s MRO (Open Market Operations) and SMP (Security Markets Programme) tenders.
Last week banks asked for €94.7B liquidity, €17B less than maturing liquidity operation.
Together with banks front-loading on their reserve requirements and in a context of reduced excess liquidity (about €13B), it pressured eonia higher to 0.359% yesterday, well above the 0.25% refi-rate at which banks get unlimited liquidity (if backed by collateral) at the MRO’s tenders.
The ECB clearly signalled that it would act in case of an unwarranted increase of money market rates. Of course, one week of higher eonias is not enough to trigger ECB action.
According to Piet Lammens at KBC Markets:
"Banks have the opportunity to ask more liquidity in today’s MRO, which should push the eonia lower again.
"Also the front-loading of their reserve requirements may lessen, which could push the excess liquidity again higher.
"We will also closely follow the SMP tender. Last week, the ECB managed only just to absorb the full amount of its SMP bond portfolio. Banks may be less eager to participate, if eonia is high."
At last week’s SMP operation, the ECB had to pay on average 0.21% to the participating banks (marginal rate was even 0.25%, the maximum).
"High rates at the 1-week SMP operation also keep eonia high. So, heightened alert is warranted. Longer term eonia (1-year 1 year forward) remained until now little affected by the tensions, which might keep the ECB on the bench," says Lammens.
Technical outlook for the Euro
For our pound euro forecasts please see our latest note on the pair here.
Below are a selection of views concerning the outlook for the euro dollar exchange rate's outlook (EUR/USD):
Luc Luyet at MIG Bank says:
"EUR/USD's bounce near the support at 1.3524 has thus far been weak. Hourly resistances stand at 1.3583 (16/01/2014 low) and 1.3650 (16/01/2014 high, see also the declining trendline). Other supports can be found at 1.3490 and 1.3400.
"In the longer term, the recent false breakout near the key resistance area defined by 1.3811 (11/12/2013 high) and the long-term declining trendline (around 1.3890) confirm a limited upside potential. We favour a gradual corrective phase towards the 200 day moving average (around 1.3350)."
Emmanuel Ng at OCBC:
"Our view on the pair remains essentially unchanged with a top heavy posture, especially after the German ZEW readings yesterday. It remains to be seen if the EUR-USD can overcome the 1.3565/75 range and failing which, a retracement back towards the 1.3510 neighbourhood cannot be discounted."
Piet Lammens at KBC Markets says:
"In the second half of last month, EUR/USD held in a rather tight range (1.3650/1.3893) within reach of the 2013 top. The Fed tapering of asset purchases was only a limited support for the dollar.
"The Fed convinced markets a “real” tightening of monetary policy is still far away. At the same time, the market didn’t expect the ECB to ease policy in the near future, even as the bank maintains an easing bias.
"At the start of this year, EUR/USD dropped below 1.3625, indicating a loss of momentum. The poor US payrolls report questioned this break, but gains of the euro remain limited. The ST EUR/USD downtrend remains intact. Medium-term 1.3296 is key support."
