Risk/reward favours being long euro/dollar going into the ECB, warns trader

European Central Bank president Mario Draghi has solid credentials in his favour when it comes to surprising markets and triggering moves in the single currency, but things might be different this time around, a trader warned on Thursday.

For starters, the consensus was firmly in favour of another episode of “over delivery” by Draghi.

What’s more, the ‘whispers’ from economists were also pointing in the same direction.

That means that such an event was already priced into the euro/dollar currency pair.

So as the old market adage “buy the rumour, sell the news” goes, Jerome Troin-Lajous, who deals in cross asset sales at Louis Capital Markets, recommended clients “sell the news.”

In his opinion, the current risk-reward equation favoured being ‘long’ euro/dollar going into the ECB’s policy announcement.

Troin-Lajous also cautioned that a pull-back in those equity names with the highest correlations to the US dollar was likely to ensue.

Unilever and Merlin Entertainments were among the London-listed stocks which stood to lose the most from a rise in the euro, he said.