Super Thursday? What Super Thursday? Normally, volatility gets sapped during periods with lots of top-tier events, but today wasn’t a normal day it seems since many pairs were on the move.
Noteworthy are the Kiwi and the Greenback since they were fighting for the top spot, with the Kiwi ultimately winning out. The euro, meanwhile, was mostly weaker (except against the yen) ahead of the ECB presser.
As for the pound, it had a mixed performance during the session (and for the day for that matter).
- Swiss jobless rate: steady at 3.2% vs. 3.3% expected
- German industrial production m/m: 0.8% vs. 0.5% expected, -0.4% previous
- German industrial production y/y: 2.9% vs. 2.1% expected, 1.9% previous
- French trade balance: -€5.5B vs. -€5.9B expected, -€4.8B previous
- Swiss CPI m/m: 0.2%, same as previous vs. 0.0% expected
- Swiss CPI y/y: 0.5% vs. 0.3% expected, 0.4% previous
- Euro Zone final Q1 GDP q/q: 0.6% vs. unchanged at 0.5% expected
- Euro Zone final Q1 GDP y/y: 1.9% vs. unchanged at 1.7% expected
- ECB maintains refinancing rate at 0.00%
- Marginal lending rate maintained at at 0.25%
- Likewise, deposit rate maintained at -0.40%
- QE extension until December 2017 (or beyond) at €60B per month affirmed
- ECB removes phrase that rates are may be slashed “to lower levels”
- However, ECB retains phrase that it “stands ready to increase the programme in terms of size and/or duration”
- ECB press conference coming up; watch it live here
ECB monetary policy decision
As expected, the ECB decided to maintain its current monetary policy. As such, the refinancing rate is maintained at 0.00%, the marginal lending rate is kept at at 0.25%, and the deposit rate is steady at -0.40%.
In addition, the ECB affirmed that monthly asset purchases will continue at a monthly pace of €60 billion “until the end of December 2017, or beyond, if necessary.”
Moreover, the ECB reiterated that it will maintain its asset purchase program until it “sees a sustained adjustment in the path of inflation consistent with its inflation aim.”
Also, the ECB gave its usual warning that:
“If the outlook becomes less favourable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, the Governing Council stands ready to increase the programme in terms of size and/or duration.”
Anyhow, the decision to hold steady was widely expected, so market players 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.
Nevertheless, the ECB did remove the phrase “or lower levels” with regard to interest rates, implying that it no longer has an easing bias, at least with regard to interest rates.
Just look at the statement below from today’s official press statement.
“The Governing Council expects the key ECB interest rates to remain at their present levels for an extended period of time, and well past the horizon of the net asset purchases.
Now compare that with the one below from the previous ECB press statement.
“The Governing Council continues to expect the key ECB interest rates to remain at present or lower levels for an extended period of time, and well past the horizon of the net asset purchases.
Also, the minutes of the previous ECB meeting had this interesting bit.
“Looking ahead, it was suggested that, if the euro area recovery kept up its momentum and progress was made in attaining a sustained adjustment in the path of inflation, due consideration would need to be given to adjusting the present formulation of the Governing Council’s forward guidance.”
Conservative Party’s lead widens
According to the latest poll results, the Conservative Party’s lead against labor widened a bit.
This one from Ipsos Mori is the lost poll released and it gives the Conservatives a moderate lead.
Westminster voting intention:
CON: 44% (-1)
LAB: 36% (-4)
LDEM: 7% (-)
UKIP: 4% (+2)
GRN: 2% (-)
Chgs. with 01 Jun
— Britain Elects (@britainelects) June 8, 2017
And based on the latest polls, Britian Elects’s nowcast is forecasting that the Conservatives will likely capture 356 seats, up from 330 seats previously, and above the 326-seat threshold to get a working majority.
Our (final) Nowcast for the 8th June:
CON: 356 (+26)
LAB: 219 (-13)
SNP: 43 (-13)
LDEM: 9 (+1)
— Britain Elects (@britainelects) June 8, 2017
More risk-taking in Europe
There was another wave of risk-taking in Europe during today’s morning London session, despite lots of risk events on today’s calendar.
- The pan-European FTSEurofirst 300 was up by 0.27% to 1,533.53
- Germany’s DAX was up by 0.48% to 12,733.00
- The blue-chip Euro Stoxx 50 was up by 0.68% to 3,572.50
U.S. equity futures also got a bullish boost.
- S&P 500 futures were up by 0.16% to 2,436.00
- Nasdaq futures were up by 0.26% to 5,895.12
Market analysts say that Banco Popular’s rescue is still spurring demand for European banking shares, improving overall risk sentiment in the process.
Major Market Mover(s):
The euro had a bad run during the session and ahead of the ECB presser, possibly because of the Bloomberg report I mentioned in yesterday’s recap – the one about the ECB supposedly planning to downgrade its inflation outlook. And it certainly didn’t help that the ECB implied in its official press statement that it still doesn’t believe that the rise in inflation is sustainable.
EUR/USD was down by 38 pips (-0.34%) to 1.1224, EUR/CAD was down by 51 pips (-0.33%) to 1.5162, EUR/NZD was down by 52 pips (-0.34%) to 1.5568
The yen lost out to the euro and was the worst-performing currency of the session, very likely because of the risk-on vibes, although earlier news about North Korea firing some missiles may still be weighing down on the poor yen.
GBP/JPY was up by 42 pips (+0.30%) to 142.59, CAD/JPY was up by 38 pips (+0.48%) to 81.54, CHF/JPY was up by 38 pips (+0.34%) to 113.93
The Kiwi was the best-performing currency of the morning London session (yet again) after it gave the Greenback a good smack-down. There were no apparent catalysts but the risk-on vibes likely sustained demand for the higher-yielding Kiwi.
NZD/USD was up by 7 pips (+0.11%) to 0.7209, NZD/CHF was up by 20 pips (+0.28%) to 0.6969, NZD/JPY was up by 48 pips (+0.61%) to 79.40
The Greenback was the second best-performing currency of the session because the Kiwi stole victory from it. As to why the Greenback was in demand, that’s not very clear. However, it’s possible that Ex FBI Director James Comey’s prepared statement may have eased jitters a bit since there were some statements there that directly contradicts the mainstream media’s Trump-Russia Connection Conspiracy Theory.
USD/JPY was up by 56 pips (+0.51%) to 110.14, USD/CAD was up by 5 pips (+0.04%) to 1.3509, USD/CHF was up by 18 pips (+0.18%) to 0.9667
Watch Out For:
- 12:15 pm GMT: Canadian housing starts (205K expected, 213K previous)
- 12:30 pm GMT: ECB Press conference; watch it live here
- 12:30 pm GMT: Canadian NHPI (0.3% expected, 0.2% previous)
- 12:30 pm GMT: U.S. initial jobless claims (241K expected, 248K previous)
- 2:00 pm GMT: Ex-FBI Director James Comey will testify before Congress
- 2:30 pm GMT: Results of the BOC’s financial system review will be released
- 3:15 pm GMT: Press conference with BOC Boss-man Stephen Poloz on BOC financial system review
- U.K. elections today; read Forex Gump’s write-up on that here