Currency Markets Very Cautious on ECB: Gkionakis

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Nov. 7 (Bloomberg) -- Vasileios Gkionakis, global head of FX strategy at UniCredit Bank, talks with Guy Johnson about how currency markets are positioned for today’s ECB decision, how low inflation impacts the European economy and the prospect of a rate cut in 2014. He speaks on Bloomberg Television’s “The Pulse.”

We will see either easing or hints at easing from mario draghi today.

How do you think the market is set up?

I think the market is set up a very cautiously.

Initially, we had the back of the very low inflation.

-- euro selling off on the back of the very low inflation.

I think the market is very cautious right now.

The 2 dimensions in what mario draghi can do -- rate cuts and rhetoric on currency.

We are looking to see a rate cut.

I think we are not going to see mario draghi overly concerned about the currency.

The reason for that is that basically the ecb cares about the trade weighted index.

It does not just look at the euro dollar itself.

Even if you look at the euro dollar itself, or you look at the trade weighted index, it is pretty much at the same level.

The ecb also cares about the pace of the trade weighted index.

If you go back in february when you had draghi verbally intervening in the currency market, we had a. of six months -- a period of six months of the trade weighted index.

Right now, it is virtually zero.

In that sense, i do not think he is going to express -- based on what he has done previously -- a major concern about the currency.

He might express some concern about mandates that the central bank has.

We are nowhere near 2% inflation.

That is true.

We are in a state -- a stage in the business cycle where he may a knowledge the fact that low inflation is beneficial for the european real economy.

What has been happening is that the eurozone has a massive internal evaluation.

-- devaluation.

The low inflation is providing a boost to real incomes.

You can see that in the consumer sentiment.

These things will take time.

The labor market in the eurozone is about as frictionless in the u.s.. it does take time.

It will take a lot of grease to get this thing down.

There is another argument for looking at this.

I want to have a brief conversation about rate cuts.

Do you think we could get one before 2014? and if we do get one in the future, do you think we keep the record or as it is or do we see it changing -- the rate core door as it is or do we see a changing?

One is in charge of territory and it is also a tax burden on banks.

As far as the ref the rate -- the rate -- i think probably the number one priority for ecb is another ltro.

To some extent basically what has been happening -- i have been hearing a lot about banks paying back the ltro.

What they are paying back is these loans that are of no use to them.

That is why we are seeing a very long being in the cards.

Thank you very much.

Francine, back to you.

This is what we have coming up.

It is twitter's time to fly.

The social media giant goes public today.

Just a reminder, you can follow both of us on twitter.

We will see either easing or hints at easing from mario draghi today.

How do you think the market is set up?

I think the market is set up a very cautiously.

Initially, we had the back of the very low inflation.

-- euro selling off on the back of the very low inflation.

I think the market is very cautious right now.

The 2 dimensions in what mario draghi can do -- rate cuts and rhetoric on currency.

We are looking to see a rate cut.

I think we are not going to see mario draghi overly concerned about the currency.

The reason for that is that basically the ecb cares about the trade weighted index.

It does not just look at the euro dollar itself.

Even if you look at the euro dollar itself, or you look at the trade weighted index, it is pretty much at the same level.

The ecb also cares about the pace of the trade weighted index.

If you go back in february when you had draghi verbally intervening in the currency market, we had a. of six months -- a period of six months of the trade weighted index.

Right now, it is virtually zero.

In that sense, i do not think he is going to express -- based on what he has done previously -- a major concern about the currency.

He might express some concern about mandates that the central bank has.

We are nowhere near 2% inflation.

That is true.

We are in a state -- a stage in the business cycle where he may a knowledge the fact that low inflation is beneficial for the european real economy.

What has been happening is that the eurozone has a massive internal evaluation.

-- devaluation.

The low inflation is providing a boost to real incomes.

You can see that in the consumer sentiment.

These things will take time.

The labor market in the eurozone is about as frictionless in the u.s.. it does take time.

It will take a lot of grease to get this thing down.

There is another argument for looking at this.

I want to have a brief conversation about rate cuts.

Do you think we could get one before 2014? and if we do get one in the future, do you think we keep the record or as it is or do we see it changing -- the rate core door as it is or do we see a changing?

One is in charge of territory and it is also a tax burden on banks.

As far as the ref the rate -- the rate -- i think probably the number one priority for ecb is another ltro.

To some extent basically what has been happening -- i have been hearing a lot about banks paying back the ltro.

What they are paying back is these loans that are of no use to them.

That is why we are seeing a very long being in the cards.

Thank you very much.

Francine, back to you.

This is what we have coming up.

It is twitter's time to fly.

The social media giant goes public today.

Just a reminder, you can follow both of us on twitter.

This text has been automatically generated. It may not be 100% accurate.

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