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Dollar Spikes After Weidmann’s ECB Rate-Hike Comments

Courtesy of ZeroHedge. View original post here.

The euro is weakening and Dollar Index spiking (back above pre-FOMC Minutes level) following headlines from Buba President Jens Weidmann on ECB rate-hike guidance.

When asked about prospects for ECB interest rates, Bloomberg reports that Weidmann pointed to investor expectations built on the economic situation and communication by the central bank. Given the current economic backdrop, expectations for hikes to begin in mid-2019 are “not completely unrealistic,” he said.

Weidmann’s comments come as the ECB debates how to wind down QE after September and amend language that currently includes a pledge to keep interest rates unchanged “well past” that time. With the 19-nation economy expanding strongly and confidence increasing that inflation will sustainably pick up, officials have signaled that a shift could come early this year.

“This could probably be one part of our discussion — whether to complement any decision on the asset-purchase program and on communication regarding the asset-purchase program with a bit more specificity with respect to the interest-rate guidance,” Weidmann said in an interview with Bloomberg Television in Frankfurt. “‘Well past’ is a rather vague time dimension so it could be about specifying what well past means.”

The reaction was EUR selling, USD buying…

We suspect the move is as much technical stop-hunting as fundamental shift as FX algos worldwide sharpen their headline-reading minds on Powell’s hearing.


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