Forex Flash: EUR/AUD faces headwinds from ECB – ANZ

FXstreet.com (Barcelona) - The ECB’s post-meeting comments last week on negative deposit rates could become a headwind for the EUR/AUD. According to FX Strategist Andrew Salter at ANZ, “A negative deposit rate is not a credible or expected policy at this stage. However, it is a ‘shot across the bow’ to foreign exchange markets.”

Past cases where negative deposit rates have been introduced have unambiguously been in response to unwelcome upward pressure on the exchange rate. Compared to when the trade was initiated, it therefore appears that the ECB are somewhat more sensitive to a rallying EUR than was expected.

In the AUD, “the short-term speculative community has constructed notable short positions in recent days. With market commentary noting underlying demand from corporate and real money accounts in recent sessions, it also appears likely the AUD is poised for a squeeze.” Salter adds.