ECB Minutes Signal Pivot on Stimulus, Sending Euro Higher

A container is loaded onto a cargo ship at the Tianjin port in China. The US government owes China US$1.2 trillion

Dow Jones closed up by 0.80 percent, S&P 500 ended up 0.70 percent, Nasdaq finished the day up by 0.79 percent. "If any of those were to be shaken that would be a big problem", said Jeanne Asseraf Bitton, head of cross-asset research at Lyxor Asset Management.

On top of this, the shared currency has benefitted from market hopes that German Chancellor Angela Merkel's CDU Party is making progress towards opening formal coalition negotiations with the SPD Party.

EUR/USD is likely to find support at 1.1913 levels and now trading at 1.2036 levels.

Against a basket of currencies the dollar turned negative and was down 0.2 percent after earlier trading higher.

While the currency's rise has reflected growing optimism over the bloc's economic recovery, investors have flagged it as a potential brake on stocks.

On the other hand, the benchmark German 10-year bunds yield hit a five-month high of 0.532% after accounts of the ECB's December meeting showed it thinks it should revisit its communication stance in early 2018.

"The market is a bit nervous to push it on too much further ahead of CPI in the States", he said.

In any event yesterday's move didn't impact United Kingdom and U.S. equity markets with the FTSE100 closing at a record high, while USA markets continued their march onwards to new records with the S&P500 posting its best start to a year since 1987.

With the eurozone seeing its best growth in a decade, the European Central Bank should gradually shift its stance to avoid a more disruptive move later and look at a broader revision of its policy guidance to reduce the focus on bond purchases and raise the emphasis on interest rates, they showed.

Investors took the relatively hawkish statement as a further signal that the European Central Bank will wind down its 2.55 trillion euro ($3.07 trillion) bond purchase scheme this year if Europe's economy continues to hum along.

Amundi's Defend said the gradual removal of liquidity from central banks would drive volatility higher across asset classes this year.

"If the reports turn out to be true and China no longer sees Treasuries as an attractive option, the repercussions could be significant as the country is one of the biggest holders of US debt".

Wednesday was another day dominated by Christmas updates from retailers, with shares in grocer Sainsbury's SBRY.L advancing 1.5 percent after it beat forecasts slightly in its Christmas trading update. In May 2013, then-Fed chair Ben Bernanke sent global bond markets into a tailspin by suggesting the US central bank's bond buying could be reduced - an event known as the "taper tantrum".

Against the yen, the dollar hit a six-week low of 111.00 yen.

And bitcoin was up 5.7% at $14,000 on the Luxembourg-based Bitstamp exchange today. While the commodity-correlated Canadian Dollar was supported by three-year high oil prices, demand softened when it was announced that domestic building permits shrunk -7.7% in November, marking a significant turnaround from October's +4.4% gain.

Analysts say that means investors are pricing in a 50-60 percent chance of a 10 bps increase in the ECB's deposit rate - the minimum it is likely to increase - from minus 0.4 percent.

Investors warned that while rising oil prices were supportive, they could weigh negatively especially on crude-consuming regions.

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