The euro had a mixed performance ahead of the ECB statement. But when the ECB later revealed that it removed its easing bias on its QE program, the euro immediately spurted higher across the board to claim the top spot.
As for other currencies of note, we have the Greenback and the Kiwi since the former was initially the dominant currency of the session until the euro usurped it while the latter was the weakest currency of the session.
- Swiss jobless rate: 2.9% as expected vs. 3.0% previous
- German factory orders m/m: -3.9% vs. -1.8% expected, 3.0% 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 removed easing bias on QE program
- ECB presser coming up; watch it live here
ECB monetary policy decision
As expected, the ECB announced in its official press statement that it was keeping its current monetary policy.
As such, the refinancing rate is still at 0.00%. The marginal lending rate, meanwhile, is steady at 0.25%. And the deposit rate is unchanged at -0.40%.
Moreover, the ECB reiterated that interest rates ain’t moving anytime soon when it repeated its message that:
“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.”
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.
However, the biggest change in the ECB’s press statement is its omission of the ECB’s easing bias on its QE program.
To be more specific, the following phrase was purged from the most recent ECB press statement.
“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.”
This change in tune, while not entirely unexpected, is a bit hawkish and signals that the ECB may be getting ready to end its QE program.
Market players are now waiting for what ECB Overlord Draghi has to say in the presser for more clues on the ECB’s next move.
By the way, you can watch the ECB presser live by clicking here, if you’re interested.
Commodities fall further
Despite the narrative that fears of a potential trade are abating, commodities were broadly kicked lower yet again today, likely because Trump still wants to slap imports tariffs on aluminum and steel.
Sure, there were earlier reports that claimed that Trump is open to exempting some countries from the tariffs. However only some countries will be exempted, not all countries, and the planned tariffs are still in the works.
Other than that, the Greenback’s recovery also likely helped to dampen demand for commodities. And for reference, the U.S. dollar index was up by 0.22% to 89.75 for the day when the session ended.
Base metals were down and out for the count.
- Copper was down by 1.43% to $3.091 per pound
- Nickel was down by 2.21% to $13,252.50 per dry metric ton
Precious metals were also in the red.
- Gold was down by 0.11% to $1,326.10 per troy ounce
- Silver was down by 0.02% to $16.490 per troy ounce
Oil benchmarks were also taking hits.
- U.S. WTI crude oil was down by 0.21% to $61.02 per barrel
- Brent crude oil was down by 0.44% to $64.06 per barrel
Some risk-taking ahead of ECB presser
The major European equity indices had a mixed start, but it soon became apparent that there was some buying pressure since most of them were in the green by the end of the session and ahead of the ECB pressure.
And of those equity inbdices that were still in the red, they were all of their lows for the day.
And market analysts say that the prevalence of risk appetite ahead of the ECB presser was due to deal-making activity in Europe, as well as easing fears of a potential trade war after earlier reports were released that said that Trump may exempt some countries from import tariffs.
However, there are already signs that risk aversion is taking over since the major European equity indices began to hold steady and some even began to take a step back after the ECB changed its tune to a more hawkish one or at least one that’s less dovish.
- The pan-European FTSEurofirst 300 was up by 0.32% to 1,463.23
- Germany’s DAX was still down by 0.12% to 12,230.50 but is off the day’s low at 12,176.73
- The blue-chip Euro Stoxx 50 was up by 0.34% to 3,391.00
U.S. equity futures were also in positive territory, which is also a sign that risk-taking was the dominant sentiment in Europe.
- S&P 500 futures were up by 0.25% to 2,730.00
- Nasdaq futures were up by 0.47% to 6,956.75
Major Market Mover(s):
The euro had a mixed performance ahead of the ECB statement. But when the ECB released its official press statement and revealed that it removed its easing bias on its QE program, the euro reacted by surging higher across the board.
EUR/USD was up by 8 pips (+0.07%) to 1.2419 after falling by 42 pips (-0.34%) to 1.2368 earlier, EUR/CHF was up by 32 pips (+0.27%) to 1.1731, EUR/NZD was up by 66 pips (+0.39%) to 1.7098
The Greenback was the best-performing currency of the morning London session until the resurgent euro pushed it aside. Even so, the dollar still had a good run and was the second strongest currency of the morning London session.
There were no apparent catalysts for the Greenbacks’s strength. However, some market analysts pointed to easing fears of a trade war and net positive U.S. data from yesterday as the reasons for the Greenback’s strength.
USD/JPY was up by 19 pips (+0.18%) to 106.14, USD/CHF was up by 27 pips (+0.29%) to 0.9453, USD/CAD was up by 28 pips (+0.22%) to 1.2919
The Kiwi barely lost out to the Swissy and ended up at the bottom of the forex heap during the morning London session.
There were no clear reasons for the Kiwi’s weakness, but signs of returning risk aversion because of the ECB statement does seem likely the most probable reason. Well, that and the commodities carnage.
It’s also possible that expectations of a future tightening in the ECB’s monetary policy may be propping up the euro at the Kiwi’s expense sine the Kiwi found selling pressure across the board after the ECB statement.
NZD/USD was down by 29 pips (-0.40%) to 0.7258, NZD/JPY was down by 16 pips (-0.21%) to 77.04, NZD/CAD was down by 17 pips (-0.18%) to 0.9377
Watch Out For:
- 1:30 pm GMT: ECB Presser; watch it live here
- 1:30 pm GMT: Canadian building permits (-0.3% expected, 4.8% previous) and housing starts (217K expected, 216K previous)
- 1:30 pm GMT: Canada’s NHPI (0.1% expected, 0.0% previous)
- 1:30 pm GMT: U.S. initial jobless claims (220K expected, 210K previous)
- 4:00 pm GMT: BOC Guv’nah Stephen Poloz is expected to speak
- 8:35 pm GMT: BOC Deputy Governor Timothy Lane is scheduled to speak