Mixed feelings after ECB lending program

On Wednesday ECB offered commercial banks a Long Term Refinancing Operations (3-year loans). The demand for ECB loans occurred to be much bigger than expected. The European banks borrowed 489 billion euro, while the market expected only 300 billion euro. That fact raised a concern that the problems with the debt crisis are still unsolved and the situation in the banking sector seems to be quiet serious. That is why the euro fell against the dollar and the stock markets finished the day with red colors. Nevertheless, in short term such a movement can  help to stabilize the supply of credit to the European companies and reduce the concerns about their liquidity. It also reduces the probability of the strong sell-off of the PIIGS countries bonds, what always causes the drop of the prices of all risky assets. The next round of the lending program will take place in February 2012. The nearest resistance level for the EUR/USD is set at 1,3150 and the support near 1,3020.

Events to watch – the US GDP

On Thursday the markets will wait for the final data on the US GDP in the third quarter (consensus: 2% q/q annualized). It will be the third, final release which can have a strong impact on markets if it occurs to be higher than 2%. Apart from the GDP, there will be also a weekly data on unemployment claims and a revised index of University of Michigan and the Conference Board index on the consumers sentiment.

Pawel Kordala X-Trade Brokers

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