Article Highlights

  • ECB Gov Draghi: Policymakers haven’t discussed reducing QE
  • Draghi: Surge in inflation was mostly energy-based
  • Canadian manufacturing sales up 1.5% vs. projected 0.2% uptick
  • Canada’s foreign securities purchases down to 7.24B CAD from 15.77B CAD
  • U.S. building permits unchanged at 1.21M vs. 1.22M forecast
  • U.S. housing starts jumped from 1.10M to 1.23M vs. 1.19M forecast
  • Philly Fed manufacturing index up from 21.5 to 23.6 vs. 16.3 consensus
  • U.S. initial jobless claims at 234K vs. 252K forecast
  • U.S. crude oil inventories rose by 2.3 million barrels
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Rally and reverse! The Greenback was off to a strong start but was unable to hold on to its intraday gains despite mostly upbeat data.

Major Events:

Upbeat U.S. economic reports – Uncle Sam’s figures came in mostly in the green, reflecting consistent economic progress. Initial jobless claims landed at 234K versus the 252K forecast and down from the earlier 249K reading, chalking up its fourth consecutive week of better than expected results and bringing the overall number of filings near its lowest level since the 70s.

The Philly Fed index also posted an upside surprise as it climbed from 21.5 to 23.6 to reflect a faster pace of industry growth instead of falling to the estimated 16.3 reading. Components of the report indicated that the index for new orders picked up by 11 points while roughly a third of the firms included in the survey reported price gains.

Building permits held steady at 1.21 million instead of rising to the projected 1.22 million figure while housing starts surged from 1.10 million to 1.23 million, outpacing the 1.19 million forecast.

ECB press conference – After the European Central Bank announced its decision to keep its monetary policy unchanged for the time being, Governor Draghi and his fellow policymakers shared more deets on their assessment and outlook during the presser.

In his opening statements, Draghi downplayed the recent surge in inflation, explaining that the gains were mostly energy-based and that underlying price pressures remain subdued. With that, the ECB plans on carrying on with its stimulus efforts and could even consider using more easing tools if necessary.

When asked about whether or not the central bank has plans to reduce its QE anytime soon, Draghi repeated that policymakers haven’t discussed the idea of tapering yet. He mentioned that their December decision gives them time to diversify monetary policy action, adding that they will have a meaningful discussion if the time to taper approaches.

When asked if the ECB is still looking to increase QE, Draghi did list a few risks stemming from the Trump presidency and Brexit negotiations but noted that it’s too early to comment on any of these factors. He clarified that they are not targeting exchange rate levels since the G20 has pledged to refrain from competitive devaluation.

Mixed Canadian reports, inventory buildup  – Economic reports from Canada came in mixed, with manufacturing sales rising by 1.5% versus the projected 0.2% uptick and foreign securities purchases falling short at 7.24 billion CAD versus 10.23 billion CAD. As it turns out, Canadian investors dumped their holdings of U.S. securities, marking their fourth consecutive monthly divestment in Treasury bonds.

Meanwhile, the U.S. crude oil inventories report from the Energy Information Administration indicated a buildup of 2.3 million barrels, higher than the expected rise of 0.1 million barrels but lower than the earlier increase of 4.1 million barrels.

Major Market Movers:

EUR – The shared currency initially sold off upon hearing Draghi’s comments downplaying inflation but eventually recovered.

EUR/USD dipped from 1.0677 to a low of 1.0588 then rallied back up to 1.0661, EUR/JPY advanced from 122.18 to a high of 122.75, EUR/AUD dropped to a low of 1.4028 then pulled up to 1.4116, and EUR/GBP found support near the .8600 mark.

CAD  The Loonie was one of the weaker performers for the day as the buildup in crude oil inventories seems to have outweighed the upbeat data.

USD/CAD continued to advance to a high of 1.3353, CAD/JPY is testing support at 86.00, EUR/CAD climbed from a low of 1.4076 to a high of 1.4205, and GBP/CAD zoomed up to the 1.6400 levels.

Watch Out For:

  • 1:00 am GMT: Fed head Yellen’s testimony
  • 2:00 am GMT: Chinese Q4 GDP (6.7% expected, 6.7% previous)
  • 2:00 am GMT: Chinese industrial production y/y (6.1% expected, 6.2% previous)
  • 2:00 am GMT: Chinese fixed asset investment ytd/y (8.3% expected, 8.3% previous)
  • 2:00 am GMT: Chinese retail sales y/y (10.7% expected, 10.7% previous)

See also:

London Session Recap

Asian Session Recap

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