FXStreet (Guatemala) – Analysts at ANZ explained that the central banking world finds itself at the crossroads, with Europe signalling left, and the US indicating right.
Key Quotes:
“The ECB’s Mario Draghi has set up markets to expect another aggressive policy easing tomorrow, and while he has a good track record of over-delivering, that’s hard to sustain. Italian bond yields are now negative at the six-month term, and German yields are below zero out to nearly the 10-year window.
Inflation is certainly no impediment but at some point Draghi may find himself pushing on a string. The Fed remains on track to raise the fed funds rate on 17 December for the first time in many years (with a 25bp hike 74% priced in). This intent was confirmed by Chair Yellen’s comments this morning, along with the intent to tread slowly and carefully thereafter.
Equities have so far taken the prospect in their stride – along with unwell high-yield corporate bond markets, dire commodity prices and a suffering energy sector – and are up nearly 13% from their August low. But two weeks is a long time in financial markets, and we’ll see if some toys get thrown before D-Day. Assuming not, then the marked divergence in policy direction between Europe and the US will be unusual.”
(Market News Provided by FXstreet)