This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
EUR/USD is under pressure today, since the European Central Bank (ECB) mapped out plans to introduce tougher criteria for banks operating in the eurozone. The aim of the initiative is to strengthen the banking system and make it more transparent. European banks will be required to hold more capital for precautionary reasons: the ECB would not like to see a repeat of the banking crisis, in which we saw banks being bailed out. In the long term, the policy is likely to have a positive impact on the region. However, in the short term it restricts the way banks operate, and this has prompted traders to sell the euro.
Yesterday the euro almost reached a two-year high versus the US dollar. Weaker-than-expected non-farm payrolls from the US encouraged traders to buy the European currency, as they felt the Federal Reserve is less likely to trim its stimulus package in 2013. Some dealers began to take their profit overnight, and the ECB announcement is encouraging others to follow suit.