ECB Will Continue to Provide Liquidity as Growth Risks Increase

Daily Forex Fundamentals | Written by DailyFX | Oct 29 08 08:56 GMT |

ECB's Gonzalez-Paramo said bank's role as liquidity provider is only temporary, "until the markets resume functioning normally". He added that the bank is "not meant to substitute to markets and to massively provide liquidity over the longer term". Separately the executive board member said the July hike has been vindicated by facts and gave the ECB room to cut in October. He also said that the economic recovery will be a long process and that downside risks to growth have increased. Nothing really new in the comments that would change the prospect for a rate cut next week. Meanwhile, Euro-Dollar (EURUSD) consolidated around 1.2700 after it recorded Asian highs of 1.2842. Ahead of the European open an Eastern European name was a good seller around the 1.2800 area, which left the pair on a heavier footing, but demand for EUR-JPY and EUR-CHF on dips is underpinning in to levels underneath 1.2700. The Wall Street surge and subsequent gains in the Nikkei has given a boost to risk appetite. There evidence yesterday of pre-FOMC positioning, with the market optimistic that the Fed will delivery another policy injection to the economy. Also aiding the equity market rally is talk of pension fund related demand, which has loosened up some of the low risk safe haven FX strategies. JPY, CHF and the USD have eased across the board, although volumes and the type of names involved are still though to be low quality, suggesting that the movement we've seen is more speculative in nature. Layered offers are noted in EUR-USD from 1.2760 up to 1.2800, while the downside sees bids at 1.2700, 1.2680 and 1.2650-60. DailyFX Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.