Positive political developments helped buoy the shared currency higher last week, but the focus could shift back to monetary policy this time. Here’s what’s coming up.
Draghi’s speeches (July 9, 1:00 and 3:00 pm GMT)
Euro pairs could be off to a running start this week since no less than head honcho Mario Draghi will be giving – not one, but TWO – testimonies this Monday.
The first one is scheduled for 1:00 pm GMT and he will be talking about the euro zone economy, monetary policy, and virtual currencies (Bitcoin traders, take note!) before of the European Parliament Economic and Monetary Affairs Committee.
The next one is due to follow at 3:00 pm GMT in which Draghi will testify on the European Systemic Risk Board in front of the same folks.
As with most speeches by top central bankers, many will be on the lookout for policy clues, particularly the time frame for the ECB’s first rate hike. Recall that Draghi was hesitant to give a specific schedule for tightening, but euro bulls are hoping to get more confirmation that it will happen around September next year.
ECB meeting minutes (July 12, 11:30 am GMT)
Towards the latter part of the week, the ECB will print its Monetary Policy Meeting Accounts, which is just a fancy way of referring to the transcript of their latest policy huddle.
If you remember, the June announcement was a closely-watched one since the central bank declared their QE tapering plans and market participants listened out for rate hike clues. However, the shared currency’s reaction signaled that the announcement was less hawkish than many expected.
A handful of ECB officials have been dropping more upbeat vibes lately, though, while sources close to the central bank also hinted that many policymakers thought that an end-2019 hike would be too late. The minutes should provide a better idea of how most members of the committee are leaning.
Last Week’s Price Review
The euro had a repeat of last week’s performance since the euro is currently in second place yet again (as of 1 pm GMT).
The euro had a mixed start before finally finding support during Monday’s U.S. session and then climbing broadly higher.
There were no apparent catalysts, and market analysts were attributing the euro’s rise to the compromise agreement on illegal immigration that was struck between German Chancellor Merkel and German Interior Minister Seehofer.
And as marked on the overlay of EUR pairs above, the euro did have a positive reaction to the announcement. However, price action very clearly shows that the euro actually started moving broadly higher a few hours before the announcement, so we can’t really pin the euro’s rise on the announcement alone.
The Greenback’s rally was stalling at the time, though, and it’s possible that the euro was feeding off the Greenback’s weakness at the time.
At any rate, the euro’s price action became a mixed mess after that before encountering broad-based selling pressure during Wednesday’s London session.
And as noted in Wednesday’s London session recap, market analysts were blaming the euro’s slide on the Euro Zone’s revised services PMI report
However, price action once again very clearly shows that the euro started moving lower ahead of the PMI report. So unless there was a leak, we can’t really pin the euro’s slide on the PMI report alone. The Greenback did get a bullish boost at the time, though, so it’s possible that the euro was under pressure because of that.
In any case, the euro later rebounded during Wednesday’s U.S. session. And as pointed out in Wednesday’s U.S. session recap, that was apparently thanks to a Bloomberg report that claimed that some ECB members are supposedly “uneasy that investors aren’t betting on an interest-rate hike until December 2019” and that “A move in September or October next year is on the cards.”
However, it’s worth noting that a Handelsblatt report was also released around that time. And the report claimed that U.S. Ambassador Richard Grenell, with Trump’s blessing, supposedly invited top German auto executives to eliminate import taxes on both sides, which eased some trade-related anxiety.
In any case, the reports didn’t really entice immediate follow-through demand for the euro since the euro traded sideways after that. However, fresh buyers entered the fray during Thursday’s Asian session at around 5 am GMT.
German manufacturing data impressed, but the euro started moving higher almost an hour before the report was released, so market analysts also cited the two reports that were mentioned earlier.
Anyhow, the euro moved broadly higher for a while after that before dipping and then having a more mixed performance.
Interestingly enough, the euro got a final broad-based bullish boost when the U.S. NFP report was released, so the euro was apparently the main beneficiary of the Greenback’s weakness in the wake of the NFP report.
The Swiss Franc
The Swissy is currently in third-to-last place (as of 1 pm GMT). If the euro did well but the Swissy had an anemic performance, then does that mean that the euro and the Swissy finally parted ways?
Nope! Looking at the sample pairs below, we can see that EUR and CHF pairs actually had very similar price action.
However, the Swissy apparently didn’t fare too well on Thursday, which allowed the euro to outpace the Swissy. And demand for the Swissy was dampened on Thursday, probably because of the risk-on vibes at the time.