- Brad Bechtel, the managing director of Faros Trading LLC
Since November 2013, when Mario Draghi slashed the minimum bid rate to 0.25% expectations for a fresh easing have been heating up till June 2014. However, it seems that investors have already lost their faith in the President, while news from the 18-nation bloc is having muted impact on the single currency.
Last week Janet Yellen's testimony dragged the most traded currency pair below 1.35-mark for the first time since February. Actually, the chairwoman only highlighted the already-known fact– the Fed is planning an interest rate hike. In contrast, Yellen's peer from Europe is having less impact on markets. Draghi's decision to enter the uncharted territory by cutting a key interest rate below zero pushed the single currency 0.2% higher. Additionally, the shared currency is losing its link with the bond market, as the correlation between Euro's performance and the yield spreads of Spain, Italy and Portugal is already moving to zero. Dealers in the EUR/USD currency pair have expressed their concerns that the pair is influenced only by the events from the world's largest economy, as they have assimilated the latest action from the ECB and stated Draghi has nothing he can offer in the future. Moreover, despite the uncertainty surrounding Fed's future moves, these rumours are having even stronger impact that international anger over the crisis in Ukraine and the conflict in the Gaza Strip.
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