...said today that "downward risks" for the Euroland economy have materialized. Whoa. That's an obvious policy shift for the ECB and a clear signal that they intend to ease. Bund went up, but the Euro isn't moving down the same way. I thought exchange rates trend from one policy shift to another - am I missing something ?
Some news is just ignored by the market. Other times it is considered with a delayed reaction happening later. Sometimes the news is just factored in and built into present and future pricing consideration. In this case there may be other reasons and components being taken into account that is simply keeping the rate where it is. One thing that seems certain though, this ultra-tight trading band is most likely going to followed by an explosive move up or down or both. Maybe later this week or early next month. Think of a clock being wound too tight. I've noticed that the tighter the trading range and longer it remains so, the greater the volatility afterwards. Right before the 16-cent super spike in EUR/USD (that started in Sept 2004) we had weeks of trading that was so range-bound traders were dying of boredom. Then the monster climb hit. That almost chomped me down. sKaLpZ