Weekly review: Draghi triggers euro reversal; Deutsche revamps Autobahn
Mario Draghi, president of the European Central Bank, was on fighting form this week on a trip to London, triggering a wave of short covering in EURUSD.
Draghi, perhaps emboldened by the sunshine and Olympic fever spreading across the UK’s capital city, hinted that the ECB might restart its Securities Market Programme, declaring that the central bank would do “whatever it takes” to save the euro. The prospect that the ECB might step in to put a lid on rising Spanish and Italian bond yields pulled EURUSD, which had been threatening to break down through $1.20 earlier in the week, sharply higher. Dealers reported short covering from hedge funds, which pushed EURUSD above $1.23 until offers from real-money accounts came in.
Still, expectations are now high for some action from the ECB at its policy meeting next week and any sign that it was just posturing from Draghi should lead EURUSD to resume its down trend.
Certainly, positioning is overwhelmingly bearish for the short term in EURUSD, but we did see signs this week that corporate Germany, at least, is more constructive on the single currency in the medium to long term.
Elsewhere in the UK, Olympic spirit was sobered by dreadful GDP figures, while Barclays pointed out that the Games are unlikely to give sterling much of a boost.
The real dictator of price action in FX, however, might well turn out to be the Swiss National Bank, which many predict is likely to become more and more of a dominant player as the summer lull takes hold.
Banks back in the spotlight
After a flurry of FX ECN launches in recent months, the focus shifted back to banks’ FX offerings as Deutsche Bank, the number-one FX bank according to the Euromoney FX Survey, unveiled a revamp of Autobahn, its groundbreaking single-dealer platform.
The new version will bring together a range of FX services, from pre- and post-trade workflow, execution, analytics and market data, to market research and trader commentary via the Autobahn app market. This market will initially offer a selection of more than 160 apps.
There was also news from Citi, the world’s second-biggest FX bank, which announced it has selected Dow Jones’s DJ FX Trader to provide real-time data releases and global economic news to CitiFX Wire.
Citi says its position at the heart of the FX market provides it with an “incredible amount of information” that CitiFX Wire collates for the benefit of its staff and clients, and all that it was missing was real-time data releases and political news.
Meanwhile, developments in China continued, with figures from Swift showing that the internationalization of the renminbi is gathering pace. This week also brought news of a tie-up between Thomson Reuters, GFI and Chinese state-owned asset manager SDIC Trust to create a foreign exchange and money broker for the domestic Chinese market.
Elsewhere, retail FX continues to evolve. This week, we spoke to a company called Tradable, which is hoping to revolutionize the sector. There is more to come – watch this space.