Euro bulls still seemed unimpressed by Draghi’s remarks during the ECB presser while the dollar managed to chalk up some gains in a mixed session. The Aussie, on the other hand, was mostly weaker as risk-off flows returned.
- Draghi: Underlying inflation muted but to rise gradually in medium-term
- Draghi: Ample degree of monetary policy still needed
- Draghi sees no need to adjust forward guidance at this point
- Draghi: EUR appreciated considerably but exchange rate not a target
- Draghi: Market hike expectations aligned with ECB expectations
- U.S. headline durable goods orders up 1.0% vs. 3.0% forecast in June
- U.S. core durable goods orders up 0.4% vs. 0.5% forecast in June
- U.S. initial jobless claims at 217K vs. 215K, previous reading at 208K
- U.S. goods trade deficit widened from $64.8B to $68.3B vs. $67B forecast
- U.S. preliminary wholesale inventories flat instead of rising by 0.5%
- Chinese CB leading index up by 0.8%, previous reading at 2.2%
After announcing the central bank’s decision to keep monetary policy unchanged, ECB head honcho Mario Draghi grabbed the mic for the press conference.
In his opening statement, Draghi acknowledged that the economy is proceeding in a solid and broad-based growth path, which helps them stay confident that inflation can converge to their target even with asset purchases being winded down.
Even with trade-related uncertainties, Draghi noted that the latest data are in line with their estimates and continue to point to ongoing growth. He even projected that underlying inflation could pick up towards the end of the year and keep increasing in the medium-term.
Draghi concluded that “an ample degree of monetary accommodation is still necessary for the continued sustained convergence of inflation” to their goal.
In response to questions from the press, Draghi mentioned that the committee hasn’t discussed reinvestment yet and that they see no need to adjust forward guidance at this point. He did point out that the euro has appreciated significantly recently but clarified that the exchange rate is not a policy target.
What may have reeled some euro bears back in was his response on how market expectations for tightening are in line with ECB expectations as well. This downplays earlier rumors that some ECB officials think that markets are underestimating the chances of a hike in September 2019. He reiterated:
“[A]s far as pure expectations are concerned, they are very well aligned with the anticipation of the Governing Council that policy rates will remain at their current levels through the summer of next year. Surveys of market views confirm this very tight alignment.”
Mixed U.S. medium-tier data
Uncle Sam’s numbers came in a mix of green and red, keeping market watchers guessing how the upcoming advance GDP release might turn out. If you’re planning on trading this report, check out Forex Gump’s event preview!
Headline durable goods orders for June posted a 1.0% gain, lower than the estimated 3.0% rise but still a rebound over the earlier 0.4% drop. Core durable goods orders were up 0.4% versus the 0.5% consensus and the previous flat reading.
Underlying data revealed that the gains were mostly spurred by non-military capital goods orders, which signals that businesses continued their investment activity and purchases of equipment despite uncertainties related to tariffs.
Initial jobless claims ticked higher from the earlier 208K figure to 217K, indicating a slightly higher increase in joblessness for the reporting week. Preliminary wholesale inventories were flat instead of rising by 0.5% to suggest that businesses are able to deplete stockpiles while the goods trade deficit widened to reflect weaker export activity.
Major Market Mover(s):
The Greenback managed to snag some pips as a bit of risk aversion peeked back in the markets and traders started pricing in expectations for the advanced GDP release.
GBP/USD retreated from 1.3189 to a low of 1.3111, USD/JPY bounced off 110.79 to a high of 111.26, USD/CHF recovered to .9948, USD/CAD rose to a high of 1.3094, and NZD/USD is down to .6780.
The shared currency struggled to hold its ground as it drew some support from Draghi’s upbeat inflation view but dipped slightly on that bit about market expectations being aligned with ECB plans.
EUR/USD slid from 1.1710 to 1.1642, EUR/JPY fell from a high of 129.92 to a low of 129.45, EUR/GBP dipped to .8866 but bounced back quickly, EUR/NZD is down to 1.7155, and EUR/CAD dropped to 1.5219.
The higher-yielding Aussie trailed behind its peers as the optimism on the Trump-Juncker deal faded and gold prices were of no help.
AUD/USD tumbled from .7431 to a low of .7371, AUD/JPY slid from 82.31 to a low of 82.00, EUR/AUD popped up to 1.5780, GBP/AUD is up to a high of 1.7805, and AUD/CAD is down to .9650.
Watch Out For:
- 1:30 am GMT: Australia’s quarterly PPI (another 0.5% gain expected)