Most currency pairs were milling about in tight ranges during the morning London session, likely because forex traders are waiting for what ECB Overlord Draghi has to say in the upcoming ECB presser.
The only currency that showed uniform directional movement was the Aussie, since the Aussie was broadly lower during the session, likely because gold prices fell.
- Spanish jobless rate: 16.6% vs. 16.1% expected, 16.4% previous
- German GFK consumer sentiment: 11.0 vs. steady at 10.8 expected
- German IFO business climate: 117.6 vs. 117.1 expected, 117.2 previous
- CBI’s U.K. realized sales: 12 as expected, 20 previous
- ECB announced no changes to current monetary policy
- ECB maintained refinancing rate at 0.00%
- Marginal lending rate maintained at at 0.25%
- Likewise, deposit rate maintained at -0.40%
- QE extension until September 2018 at €30B per month was reaffirmed
- ECB did not remove easing bias on QE program
- ECB presser coming up; watch it live here
- Canada’s retail sales report; read Forex Gump’s Event Preview
ECB monetary policy decision
As expected, the ECB announced in its official press statement that it was maintaining its current monetary policy. The refinancing rate is therefore still at 0.00%. The marginal lending rate, meanwhile, is steady at 0.25%. As for the deposit rate, it is unchanged at -0.40%.
The ECB also affirmed that its extended QE program will run “until the end of September 2018, or beyond, if necessary” at a monthly pace of €30 billion.
Also as expected, the ECB retained its easing bias on its QE program by saying that (emphasis mine):
“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 asset purchase programme (APP) in terms of size and/or duration.”
No surprises there. Market players are now waiting on what ECB Overlord Draghi has to say, so do keep an eye on the euro.
By the way, you can watch the ECB presser live by clicking here, if you’re interested.
BOC’s Poloz speaks
BOC Boss-Man Stephen Poloz was interviewed by CNBC earlier. And Poloz was bluntly asked when the next rate hike will be. And, well, Poloz responded in an evasive yet somewhat neutral manner when he said that:
“That’s a question even I don’t know the answer to. We’re being very open about that. So we’ve explained to people that there are a number of important issues that force us to not be mechanical or to use a rule or to plan ahead in that way. We’ve said we are totally data dependent.”
Poloz did express some concerns about household debt in Canada when he said the following, though:
“One of the most important [issues] is with the level of debt we have today, compared to what we had 10 years ago. We are absolutely certain the economy will prove to be more sensitive to higher interest rates than in the past.”
He also admitted that the BOC’s monetary policy is “very” dependent on how NAFTA renegotiations end up.
Poloz even explicitly said that problems with NAFTA would be a reason to cut rates.
To quote the man himself (emphasis mine):
“If the economy began to slow as a result, then we’d be able to put those pieces together, then it would go into the mix, the inflation target would be at risk, and we’d be cutting rates into that. But a lot of things could move at the time”
Some risk-taking ahead of ECB presser
The major European equity indices opened lower but quickly regained some poise and even closed the session on a higher note.
And market analysts say that the early risk-off vibes were due to poor earnings results. As for the later risk-on vibes, those same market analysts pointed to optimism and deal-making in the European telecoms sector, which improved overall risk sentiment.
- The pan-European FTSEurofirst 300 was up by 0.21% to 1,578.18
- Germany’s DAX was up by 0.15% to 13,433.00
- The blue-chip Euro Stoxx 50 was up by 0.26% to 3,659.00
U.S. equity futures were also enjoying the risk-friendly vibes.
- S&P 500 futures were up by 0.27% to 2,848.75
- Nasdaq futures were up by 0.54% to 6,968.50
Major Market Mover(s):
Trading conditions were rather tight during the morning London session, so much so that most pairs were basically just trading sideways. Heck, some even finished the session flat.
Aussie pairs were an exception, though, since the Aussie was uniformly sliding across the board.
As to what caused the Aussie to slide lower, there’s no clear reason for that. However, it’s very likely that the Aussie was tracking gold prices since gold came off its intraday highs during the session. And for reference, gold was down by 0.18% to $1,358.84 per troy ounce after reaching a peak of $1,366.06 earlier.
AUD/USD was down by 16 pips (-0.20%) to 0.8070, AUD/JPY was down by 19 pips (-0.22%) to 87.96, AUD/CHF was down by 16 pips (-0.22%) to 0.7602
Watch Out For:
- 1:30 pm GMT: ECB Presser; ; watch it live here
- 1:30 pm GMT: Headline (+0.8% expected, +1.5% previous) and core (+0.9% expected, +0.8% previous) readings for Canadian retail sales; read Forex Gump’s Event Preview
- 1:30 pm GMT: U.S. initial jobless claims (235K expected, 220K previous)
- 1:30 pm GMT: U.S. goods trade balance (-$68.6B expected, -$70.0B previous)
- 3:00 pm GMT: U.S. new home sales (675k expected, 733K previous)
- 3:00 pm GMT: CB’s U.S. leading index (0.5% expected, 0.4% previous)