Article Highlights

  • French BOF business sentiment: 101 vs. 100 expected, 99 previous
  • ECB maintains refinancing rate at 0.00%
  • ECB maintains marginal lending rate at 0.25%
  • ECB maintains deposit rate at -0.40%
  • ECB maintains QE program at €80B
  • ECB extends QE program to December 2017 or beyond
  • €80B monthly purchase rate only effective until March 2017
  • After that, QE program will only be at a monthly rate of €60B
  • ECB press conference coming up; watch it live here
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As expected, the ECB decided to keep rates on hold while extending its QE program to December 2017. The euro spiked after the announcement, then quickly got dumped. Directional movement on most of the other pairs, meanwhile, was relatively subdued.

Major Events/Reports:

ECB monetary policy decision – As widely expected, the ECB decided to keep rates on hold while extending its QE program. However, the extended QE program, which will start on April 2017 and end on December 2017, will only be at a monthly rate of €60B, which is surprising because the consensus was that an extended QE would be maintained at the current €80B pace.

And while the ECB has scheduled the QE program to end on December 2017, the ECB was also quick to add that if “the outlook becomes less favourable or if financial conditions become inconsistent with further progress towards a sustained adjustment of the path of inflation, [then] the Governing Council intends to increase the programme in terms of size and/or duration.”

Forex traders are now waiting for what Draghi and company have to say in the upcoming ECB press conference. By the way, you can watch the ECB press conference live here.

Commodities sally forth Most commodities were in full rally mode during today’s morning London session.

Precious metals were mixed, but mostly up.

  • Gold was up by 0.20% to $1,179.85 per troy ounce
  • Silver was down by 0.36% to $17.212 per troy ounce

Base metals, meanwhile, got some broad-based loving.

  • Copper was up by 0.30% to $2.652 per pound
  • Nickel was up by 0.18% to $11,425.00 per dry metric ton

As for oil benchmarks, they were also on the up and up.

  • U.S. crude oil was up by 0.82% to $50.18 per barrel
  • Brent crude oil was up by 0.87% to $53.46 per barrel

Market analysts couldn’t pinpoint the reason for the broad-based rally. However, we’re probably just seeing some bargain hunting, since the U.S. dollar index was down by 0.35% to 99.93 for the day. Oh, for the newbies out there, globally-traded commodities are usually prices in Greenbacks. A weaker U.S. dollar therefore means that commodities become relatively cheaper, making them more attractive to buy.

Another round of risk-taking in Europe – Europe got inundated with another wave of risk-taking during today’s morning London session, sending European equity indices higher for yet another day. Today’s appetite for risk is more subdued compared to the past couple of days, however.

  • The pan-European FTSEurofirst 300 was up by 0.32% to 1,378.08
  • The blue-chip Euro Stoxx 50 was up by 0.57% to 3,156.00
  • Germany’s DAX was up by 0.52% to 11,044.05

U.S. equity futures also got a modest lift.

  • S&P 500 futures were slightly up by 0.07% to 2,238.25
  • Nasdaq futures were modestly up by 0.11% to 4,846.88

Market analysts point out that banking shares are still leading the way although miners helped improve overall risk sentiment as well. The risk-on vibes were therefore due to the broad-based commodities rally, as well as expectations that the ECB will extend its QE program. And as I mentioned earlier, we now know that the ECB did kinda extend its QE program.

Major Market Movers:

EUR – The euro steadily got bid up ahead of the ECB statement. And when the ECB finally announced its monetary policy decision, euro pairs spiked higher across the pair, even though the ECB announced an extension of its QE program, albeit at a slower pace. Whether the spike was due short covering or algos reading the €60B figure as tapering, I don’t know for sure. Cooler heads apparently prevailed, however, since the spike quickly got faded. Now we just have to wait for the presser.

EUR/USD was down by 11 pips (-0.12%) to 1.0749 with 1.0873 as session high, EUR/CAD was down by 17 pips (-0.12%) to 1.4213 with 1.4353 as session high, EUR/AUD was up by 11 pips (+0.08%) to 1.4384 with 1.4512 as session high

CHF – Price action on the Swissy was rather messy and mixed at the start, but the Swissy broadly weakened across the board about an hour before the ECB statement. There was no clear reason for the sudden weakness, but I wouldn’t discount the SNB sneakily weakening the Swissy again.

USD/CHF was up by 35 pips (+0.35%) to 1.0101 with 1.0020 as session low, NZD/CHF was down by 4 pips (-0.06%) to 0.7253 with 0.7216 as session low, CAD/CHF was up by 27 pips (+0.36%) to 0.7640 with 0.7589 as session low

GBP – The pound advanced against all its peers during the session. There were no apparent catalysts, but it’s possible that we’re just seeing some short covering after yesterday’s pounding. Although some market analysts also say that the pound’s strength was at the expense of the euro.

GBP/USD was up by 17 pips (+0.13%) to 1.2657, GBP/CHF was up by 60 pips (+0.47%) to 1.2785, GBP/AUD was up by 54 pips (+0.32%) to 1.6933

Watch Out For:

  • 1:15 pm GMT: Canadian housing starts (191.0K expected, 192.9K previous)
  • 1:30 pm GMT: ECB press conference
  • 1:30 pm GMT: Canadian building permits (1.5% expected, -7.0% previous)
  • 1:30 pm GMT: U.S. initial jobless claims (257K expected, 268K previous)
  • 1:30 pm GMT: Canada’s capacity utilization rate (81.5% expected, 80.0% previous)
  • 1:30 pm GMT: Canada’s NHPI (0.2% expected, same as previous)

See also:

Asian Session Recap

U.S. Session Recap

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