Article Highlights

  • U.S. initial jobless claims at 258K as expected
  • ECB upgraded 2017 inflation forecast from 1.2% to 1.3%
  • ECB downgraded 2018 inflation forecast from 1.6% to 1.5%
  • ECB projected 2017 GDP at 1.7% from earlier 1.6% forecast
  • ECB Gov Draghi: “Very broad” consensus to extend QE
  • Draghi: Staff forecasts aren’t in line with ECB targets
  • ECB member Weidmann dissented QE extension
  • Canadian housing starts down from 192K to 184K
  • Canada’s building permits up 8.7% vs. 1.6% consensus
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Euro pairs continued to slide as Governor Draghi grabbed the mic during the ECB presser and hinted that QE could carry on for much longer.

Major Events:

ECB press conference – In my London session recap, I gave y’all the deets on the ECB’s latest policy decision in which Governor Draghi and his buddies decided to extend QE past the March 2017 end-date but “taper” monthly bond purchases from the current €80B to €60B from April to December 2017.

During the presser, Draghi shared that staff forecasts upgraded next year’s inflation estimate from 1.2% to 1.3% but downgraded the 2018 estimate from 1.6% to 1.5%. They also projected that the economy will grow by 1.7% in 2017, up from their earlier 1.6% forecast. However, the ECB head honcho quickly pointed out that the staff forecasts aren’t in line with their targets, which suggests that the central bank could continue to make a few moves here and there in order to boost growth and inflation much higher.

Draghi also mentioned that there was a “very broad” consensus to extend QE, even as ECB member Weidmann from Germany dissented this move. He added that buying bonds below deposit rates could also be an option in order to ensure a smooth implementation of QE. On a less downbeat note, he acknowledged that deflationary risks have subsided but followed it up by cautioning that plenty of uncertainties still remain.

Upbeat medium-tier data from Canada – Even with all the attention on the ECB presser, medium-tier reports from Canada managed to lift the Loonie slightly higher against its peers. Although housing starts slipped from 192K to 184K in November, the Canada Mortgage and Housing Corporation remarked that the six-month rolling average is still within trend. Also, this was overshadowed by the impressive 8.7% jump in building permits, outpacing the projected 1.6% gain and enjoying an upgrade in the earlier month.

Major Market Movers:

EUR – The shared currency dropped its gains like a hot potato when Governor Draghi confirmed that their latest moves were way more dovish than meets the eye.

EUR/USD scurried back down from a high of 1.0873 to a low of 1.0597, EUR/JPY turned from the 123.26 level to a low of 120.91, EUR/GBP slipped from .8570 to .8425, and EUR/NZD is down from 1.5094 to 1.4800.

Watch Out For:

  • 12:30 am GMT: Australian home loans (-0.9% expected, +1.5% previous)
  • 1:30 am GMT: Chinese CPI y/y (2.2% expected, 2.1% previous)
  • 1:30 am GMT: Chinese PPI y/y (2.2% expected, 1.2% previous)

See also:

London Session Recap

Asian Session Recap

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