By Marc Chandler
NEW YORK (BBH FX Strategy) -- Encouraged by the better-than-expected sovereign auctions today (Spain and Italy), softer-than-expected U.S. data (weekly jobless claims and retail sales) and comments from ECB's Draghi, the euro has recovered yesterday's losses and is testing resistance in near $1.2820 (that extends toward $1.2850). A failure to convincingly break this area will reinforce the consolidative nature of the price action, rather than an upside correction that we expect.
There were some economists who had expected an ECB rate cut today, but on balance, most -- like us -- did not. We argued that the cuts in the past two months were simply reversing the April and July rate hikes, but that with the deposit rate already at 25 bp, the next cut has greater implications. We also noted that the full extent of the ECB's past measures, like collateral liberalization, have not been fully implemented....
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