Will The Euro Advance Like The Yen?

On Thursday morning of Beijing time (March 10th), the New Zealand Federal Reserve unexpectedly cut its benchmark interest rate by 25 basis points to 2.25%, after which the market was expected to remain unchanged at 2.5%. After the news release, New Zealand dollar ushered in a big drop. In addition to the New Zealand Federal Reserve, the European Central Bank is probably happy about this outcome.

The European Central Bank will announce a new interest rate resolution Thursday (BJT) at 20:45 PM (March 10th), and the sharp fall of the New Zealand dollar in the early morning of today (March 10th) has also created the potential for tonight's interest rate resolution.

However, in the heart of the European Central Bank President Delagi, I am afraid that a haze has not dissipated. After the announcement of Japan's negative interest rate, the yen continued to strengthen. Kuroda Higashihiko, who was shot by the Japanese yen, gave Delagi a lesson. He had to start thinking that if the interest rate were cut again, would the euro go on like the yen?

In January 29th this year, Japan announced the implementation of a negative interest rate policy. Then the yen fell briefly, but it climbed for a long time. In February, it hit the biggest monthly increase in 2008. For this, my colleagues often sigh: Kuroda Higashihiko speaks every day, can easily brush Bloomberg client, but the Japanese yen is "willful" to move up.

When the negative interest rate policy did not bring the expected economic recovery, the Bank of Japan officials also began to doubt its effectiveness. According to Japan's Kyodo news, the Bank of Japan will hold a monetary policy conference from 14 to analyze and evaluate the effect of the negative interest rate policy launched in February.

What worries us is that if the European Central Bank (ECB) today launched a big monetary easing policy, or the 16 day the Federal Reserve gave up raising interest rates, the yen would probably go further.

Although the central bank presidents will stress that the depreciation of their currencies is not out of their original intention, it is unquestionable that this will improve the situation and boost the economy. Kuroda's experience sounded the alarm for Delagi, the governor of the European Central Bank: don't count on it. Rate cut It can be a great profit. In fact, it is likely to be counterproductive.

Although there were Hetian For example, but the market generally believes that Delagi's "walking on the right wire" is still very likely.

Earlier, Bloomberg survey interviewed 38 economists. Their median forecast showed that the ECB lowered the deposit interest rate by 10 basis points to -0.40%, while about 73% of the respondents thought that the European Central Bank would increase the monthly asset purchase amount in quantitative easing (QE) measures.

For the implementation of " Negative interest rate "Or" interest reduction ", timing is very important, and unlike Kuroda, the market environment facing Delagi is much more moderate. From this perspective, Della Gaby and Kuroda have more opportunities and are more likely to achieve their goals. Over the past month, stocks and commodities have been on the upswing and oil prices have also recovered sharply, prompting hedge funds to increase their Euro shorting positions for the first time this year.

"It is difficult for Kuroda to eliminate the impact of many negative events that happened at that time, but this time, drudge's policy is expected to play a strong role, because the global market has slowed down from the impact of 1-2 months," said JonathanLewis, chief investment officer of FieraCapital, which helps manage about 10 billion dollars of assets in New York.

On the eve of the ECB meeting, the euro also dropped slightly because of the adjustment in its position. The world is watching the ECB's resolution tonight. Whether the ECB is cutting interest rates or not, it will have a significant impact on the market.