After slumping hard during yesterday’s U.S. session, the Greenback was able to extend its broad-based recovery during today’s London session.
The Greenback wasn’t the top-performing currency of the session, though, since the Swissy found enough late buyers to outpace the Greenback.
The Kiwi, meanwhile, was the biggest loser of the session despite the risk-friendly vibes in Europe. Although the Aussie was a close second.
As for the euro, it was mixed during the morning London session, but that may change depending on what ECB Overlord Draghi has to say in the upcoming presser.
- German GFK consumer sentiment: 10.6 vs. steady at 10.7 expected
- Spanish jobless rate: 15.3% vs. 15.8% expected, 16.7% previous
- ECB announced no changes to current monetary policy
- ECB maintained refinancing rate at 0.00%
- Marginal lending rate steady at at 0.25%
- Likewise, deposit rate unchanged at -0.40%
- QE extension until September at €30B per month was reaffirmed
- Tapered QE extension at €15B per month until December also reaffirmed
- Forward guidance that QE program will end after December reaffirmed
- ECB repeated forward guidance that rates ain’t moving “through the summer of 2019“
- ECB presser coming up; watch it live here
ECB monetary policy decision
As expected, the ECB stated in its official press statement that no changes were made to the current monetary policy.
As such, the refinancing rate is maintained at 0.00%, while the marginal lending rate is unchanged at 0.25%. As for the deposit rate, that’s still at -0.40%.
The ECB also announced no changes to its forward guidance since the ECB reaffirmed that its QE program will continue at a monthly pace of €30 billion until the end of September 2018, while also reaffirming that QE will continue at a tapered monthly pace of €15 billion until the end of December 2018.
And after December, the ECB repeated its forward guidance that “net purchases will then end.”
More importantly (for rate hike junkies), the ECB also reiterated its forward guidance that:
“The Governing Council expects the key ECB interest rates to remain at their present levels at least through the summer of 2019.”
In other words, interest rates ain’t budging until the October 2019 ECB meeting (at the earliest).
Anyhow, market players are now sitting tight for what ECB Overlord Draghi has to say in the ECB presser. And if you didn’t know, you can watch the ECB presser live by clicking here, if you’re interested.
Risk-taking in Europe
The major European equity indices didn’t seem to mind the risk-off vibes from Asia since they were broadly in the green during today’s morning London session.
And according to market analysts, Europe was in an upbeat mood because of mostly positive earnings results and easing trade-related jitters after U.S. President Trump and European Commission President Jean-Claude Juncker announced yesterday that the U.S. and the E.U. have agreed to deescalate their trade dispute.
- The pan-European FTSEurofirst 300 was up by 0.44% to 1,522.83
- Germany’s DAX was up by 1.25% to 12,736.40
- The blue-chip Euro Stoxx 50 was up by 0.78% to 3,491.35
Risk aversion to return?
Europe may be in an upbeat mood, but it’s possible that risk aversion may return during the upcoming U.S. session since U.S. equity futures were bleeding out.
- S&P 500 futures were down by 0.19% to 2,835.75
- Nasdaq futures were down by 0.86% to 7,405.25
Global bond yields rise
Most bond yields were on the rise during the morning London session, which reinforces the idea that risk-taking was the prevalent sentiment in Europe.
Quite naturally, easing trade tensions were cited for the rise in bond yields, although some market analysts also cited speculation that the ECB is still on track towards a gradual removal of stimulus.
- German 10-year bond yield up by 6.39% to 0.416%
- French 10-year bond yield up by 3.17% to 0.713%
- U.K. 10-year bond yield up by 0.94% to 1.285%
- U.S. 10-year bond yield up by 0.93% to 2.963%
- Canadian 10-year bond yield down by 0.39% to 2.287%
Major Market Mover(s):
The Greenback slumped hard across the board during yesterday’s U.S. session when U.S. President Trump and European Commission President Jean-Claude Juncker began their meeting and shortly before they announced that the U.S. and the E.U. have agreed to deescalate their trade spat.
And according to market analysts, the Greenback slumped hard because market players were unwinding their safe-haven bets on the Greenback, given that the Greenback had been a major beneficiary of safe-haven flows generated by rising trade tensions.
Other market analysts, meanwhile, were suggesting that traders were flocking towards the euro at the Greenback’s expense.
As to what caused the Greenback to switch into recovery mode, it’s likely that higher U.S. bond yields are providing support to the Greenback. That’s what some market analysts say anyway. Other than that, it’s possible that we’re just seeing some short-covering after yesterday’s selloff.
EUR/USD was down by 22 pips (-0.19%) to 1.1710, GBP/USD was down by 16 pips (-0.13%) to 1.3178, AUD/USD was down by 14 pips (-0.19%) to 0.7420
Like the euro, the Swissy was initially mixed during the session. However, the Swissy later found late buyers and was even able to score a win against the Greenback.
Oddly enough, the Swissy began to find sellers after the ECB statement. Although it’s also possible that market players are expecting risk aversion to return when the U.S. session rolls around since U.S. stock indices were in the red.
USD/CHF was down by 4 pips (-0.04%) to 0.9916, EUR/CHF was down by 14 pips (-0.12%) to 1.1617, GBP/CHF was down by 24 pips (-0.18%) to 1.3065
The higher-yielding Kiwi was the worst-performing currency of the morning London session despite the risk-on vibes. And we can probably blame the Kiwi’s weakness to the Greenback’s strength. Although it’s also possible that the Kiwi was hit by sellers because market players are expecting risk aversion to return during the U.S. session.
NZD/USD was down by 14 pips (-0.20%) to 0.6817, NZD/JPY was down by 5 pips (-0.07%) to 75.58, NZD/CHF was down by 17 pips (-0.24%) to 0.6759
Watch Out For:
- 12:30 pm GMT: ECB presser; watch it live here
- 12:30 pm GMT: Headline (3.0% expected vs. -0.6% previous) and core (0.5% expected vs. -0.3% previous) readings for U.S. durable goods orders
- 12:30 pm GMT: U.S. initial jobless claims (215K expected vs. 207K previous)
- 12:30 pm GMT: U.S. goods trade balance (-$67.0B expected vs. -$64.8B previous)
- 12:30 pm GMT: U.S. whole sale inventories (0.3% expected vs. 0.6% previous)
- 1:00 pm GMT: CB’s Chinese leading index (2.1% previous)