U.S. Session Forex Recap – Apr. 22, 2016

  • U.S. CB leading index up by 0.2% vs. 0.4% forecast
  • ECB Draghi: Rates to stay at present levels or lower for an extended time
  • ECB Draghi: Possible for inflation to turn negative
  • ECB plans to use all monetary instruments if needed
  • Libya national oil company plans to double production with new gov’t

The Greenback chalked up back-to-back winning days, as risk aversion extended its stay on weaker oil prices and dovish ECB rhetoric.

Major Events:

ECB Governor Draghi’s press conference – ECB head honcho Mario Draghi brought some volatility to the forex party during his press conference. He mentioned that interest rates are likely to stay at their present levels or lower for an extended time, citing that global certainties still persist and that euro zone prospects are tilted to the downside.

Draghi added that he expects inflation to stay low for a long time and that it might even turn negative. On a less downbeat note, he pointed out that broad financing conditions have improved but that the central bank will still use all monetary instruments if needed.

Oil price tumble – Crude oil was unable to hold on to its gains from earlier in the week after Libya shared its plans to double output within weeks after the new government is formed. According to Libya national oil company Chairman Mustafa Sanalla, they are set to reopen the Sharara field and target a million barrels per day in production by the end of the year. Uh oh, not good for the crude oil supply glut.

Overall risk aversion? U.S. equity indices closed in the red, as Q1 earnings reports from well-known companies such as Starbucks, Alphabet, and Microsoft missed expectations. The S&P 500 index was down 0.52%, the Nasdaq ended 0.05% lower and the Dow 30 index slid 0.63%.

Major Currency Movers:

USD – The Greenback was able to take advantage of risk-off flows, as falling share prices and weaker oil prices pushed investors back to the safe-havens.

AUD/USD fell from a high of .7834 to a low of .7737, NZD/USD retreated to the .6900 major psychological support, and USD/CAD popped up from the 1.2630 area to a high of 1.2710. EUR/USD experienced a bit more volatility but ended below 1.1300, GBP/USD is down to 1.4340, and USD/CHF reached a high of .9753.

EUR – Euro pairs tossed this way and that, as traders scrambled to interpret ECB head Draghi’s remarks during the presser.

EUR/JPY popped up to a high of 124.87 then fell sharply to the 123.50 area, EUR/GBP is holding steady above the .7850 minor psychological support, EUR/AUD came close to testing the 1.4600 handle, and EUR/CAD spiked to a high of 1.4430 then slipped back to the 1.4300 area.

Watch Out For:

  • 2:00 am GMT: Japanese flash manufacturing PMI (49.6 expected, 49.1 previous)
  • 4:30 am GMT: Japan’s tertiary industry activity (-0.4% expected, +1.5% previous)

See also:

Asian Session Recap

London Session Recap

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