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18 Sep 2014
EUR/USD turns lower after TLTRO
FXStreet (Córdoba) - EUR/USD spiked to a fresh daily high and quickly turned lower right after the European Central Bank announced the results if the first targeted longer-term refinancing operations(TLTRO).
TLTRO allotment disappointed
The ECB allotted EUR 82.6 billion at its first 4-year TLTRO against expectations around EUR 110 - 150 billion. Recall, this is the program announced in June that provides loans at low rates to banks at a long maturity on condition they pass them on to the real economy. The program is aimed to combat deflation via expansion of the ECB balance sheet. A second TLTRO is scheduled for December 11.
“Perhaps banks first want to see the details of the ECB’s covered bond and ABS purchase programmes, which will be unveiled early next month, before pledging these assets as collateral in an TLTRO”, said Martin van Vliet, analyst at ING Bank.
“Today’s lower-than-expected allotment will raise further doubts about the feasibility of the ECB’s goal to increase its balance sheet by around €1 trillion (through the eight TLTROs and asset purchases)”, said the analyst. “However, while we agree that the ECB will struggle to meet this goal, we do not think the ECB will be highly alarmed by today’s outcome. . Indeed, with the December TLTRO potentially seeing stronger demand for the reasons we described, they will be cautious to draw strong conclusions about the appetite for this programme.”
EUR/USD jumped to a high of 1.2908 but quickly came under pressure as the allotment was below expectations. EUR/USD is currently trading at 1.2878, still 0.10% above its opening price.
TLTRO allotment disappointed
The ECB allotted EUR 82.6 billion at its first 4-year TLTRO against expectations around EUR 110 - 150 billion. Recall, this is the program announced in June that provides loans at low rates to banks at a long maturity on condition they pass them on to the real economy. The program is aimed to combat deflation via expansion of the ECB balance sheet. A second TLTRO is scheduled for December 11.
“Perhaps banks first want to see the details of the ECB’s covered bond and ABS purchase programmes, which will be unveiled early next month, before pledging these assets as collateral in an TLTRO”, said Martin van Vliet, analyst at ING Bank.
“Today’s lower-than-expected allotment will raise further doubts about the feasibility of the ECB’s goal to increase its balance sheet by around €1 trillion (through the eight TLTROs and asset purchases)”, said the analyst. “However, while we agree that the ECB will struggle to meet this goal, we do not think the ECB will be highly alarmed by today’s outcome. . Indeed, with the December TLTRO potentially seeing stronger demand for the reasons we described, they will be cautious to draw strong conclusions about the appetite for this programme.”
EUR/USD jumped to a high of 1.2908 but quickly came under pressure as the allotment was below expectations. EUR/USD is currently trading at 1.2878, still 0.10% above its opening price.