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Not even Draghi’s downbeat remarks were able to keep the euro down as bulls grabbed the chance to buy the shared currency at cheaper levels on tapering expectations.

The pound, on the other hand, carried on with its tumble for the day and failed to draw support from the rebound in U.K. retail sales. Meanwhile, the dollar remained under pressure as more cracks are showing in the Trump administration.

  • ECB head Draghi: Substantial amount of stimulus is still needed
  • Draghi: Growth risks balanced but have yet to translate to strong inflation
  • Draghi: Recent inflation dip due to weaker energy prices
  • Draghi: Staff hasn’t been tasked to research on tapering, policymakers unanimous on not providing a timeline
  • U.S. initial jobless claims at 233K vs. 245K expected, 248K previous
  • Philly Fed manufacturing index slumped from 27.6 to 19.5
  • U.S. CB leading index up by 0.6% vs. 0.4% forecast
  • Euro zone consumer confidence index fell from -1 to -2
  • New Zealand visitor arrivals rebounded by 5.1% from previous 1.4% drop

Major Events/Reports

Draghi tries to talk euro down

During the much-awaited ECB presser, Dovish Draghi tried to keep his poker face on and refrain from sounding too giddy about improvements in the euro zone. Instead, he reiterated that inflationary pressures were not strong enough to warrant a discussion on tapering.

In his opening statement, Draghi acknowledged that economic strength is broadening and that growth risks are balanced. However, he also lamented that this has yet to translate to stronger inflationary pressures.

Because of that, the ECB head honcho reiterated that a substantial amount of stimulus is still needed and that the central bank is likely to keep asset purchases going until they see a sustained pickup in price levels. For now, though, Draghi blamed the recent dip in inflation on lower energy prices.

In the Q&A section of the press conference, Draghi responded to repeated questions on tapering, citing that policymakers have agreed not to provide a timeline and that ECB staff hasn’t been even tasked to crunch the numbers on tapering just yet.

“Inflation is not where we want it to be, and where it should be. We’re confident it will get there, but it’s not there yet.”

He did say that they will look at inflation trends again in Autumn, and this was enough to keep market participants hopeful that it’s only a matter of time before the ECB sheds its dovish feathers.

Trump troubles still in the spotlight

The Greenback shrugged off mostly upbeat economic data as the U.S. currency was bogged down by weakening confidence in the Trump administration.

Initial jobless claims ticked down from 248K the other week to 233K last week, better than the expected improvement to 245K. The CB leading index for June was up 0.6%, outpacing the projected 0.4% gain and the earlier 0.2% uptick. However, the Philly Fed index dropped from 27.6 to 19.5 to reflect much slower growth compared to the projected fall to 23.4.

Investors appear to be growing weary of the renewed focus on the Donald’s woes, from the lack of progress in fiscal reform to ongoing investigations on the Russian intelligence information leak. According to former FBI head Mueller, the special council will be taking an extra close look at Trump’s business transactions to check if there had been anything shady going on.

In particular, the investigators will be examining Russian purchases of apartments in Trump buildings, Trump’s Russian associates in the SoHo development in New York, the sale of his Florida mansion to a Russian oligarch, and the 2013 Miss Universe Pageant in Moscow. U.S. equities also closed mostly lower, partly due to these new developments:

  • The Dow 30 index is down 28.97 points to 21,611.78 (-0.13%)
  • S&P 500 index is down 0.38 points to 2,473.45 (-0.02%)
  • Nasdaq is up 4.96 points to 6,390.00 (+0.08%)

Major Market Mover(s):

EUR

Euro traders seemed to be calling Draghi’s bluff in propping the shared currency up despite the Governor’s cautious commentary.

EUR/USD surged from a low of 1.1479 right around the time of the presser to a high of 1.1658, EUR/JPY is up from 128.78 to a high of 130.27, EUR/AUD popped up from 1.4490 to a high of 1.4649, and EUR/CHF is up to a high of 1.1076.

Watch Out For:

  • 4:00 am GMT: New Zealand credit card spending y/y (7.6% previous)
  • 4:40 am GMT: RBA policymaker Debelle’s testimony
  • 5:15 am GMT: RBA policymaker Bullock’s testimony