Traders seemed to be in a much better mood throughout the session, allowing equities to recover from the earlier slide and the higher-yielding Aussie to stay in the top spot.
The safe-haven dollar didn’t join its lower-yielding buddies, the franc and the yen, in losing ground as it cashed in on higher bond yields and euro weakness. Meanwhile, the pound still lagged far behind as Brexit jitters lingered.
- U.S. headline durable goods orders up 0.8% vs. expected 1.3% slide
- U.S. core durable goods orders posted 0.1% uptick vs. estimated 0.5% gain
- New Fed member Clarida: “Some further gradual adjustment in the federal funds rate will be appropriate”
- ECB presser: Draghi highlighted risks coming from Italy and Brexit
- Draghi: No reason to doubt confidence in inflation
- U.S. goods trade deficit widened from $75.5B to $76B vs. $74.9B forecast
- U.S. pending home sales up 0.5% vs. projected 0.1% dip
- Brexit team unable to draft plan ahead of Monday’s budget
- Italian PM Salvini: Gov’t preparing countermeasures if spreads keep widening
- U.S. Q3 advanced GDP reading due later
In his prepared statements ahead of the ECB press conference, head honcho Draghi acknowledged that the latest batch of economic data has been weaker than expected but isn’t cause for concern. After all, the figures are still in line with “an ongoing broad-based expansion of the euro area economy and gradually rising inflation pressures.”
Draghi also expressed confidence that the underlying strength of the economy continues to support their inflation expectations and that risks remain broadly balanced. He did point out that downside risks are coming from “trade protectionism, emerging markets, and financial market volatility.”
During the Q&A, the ECB Governor reiterated that the weakening momentum as shown by recent data doesn’t signal a downturn and added that the central bank has “no reason to doubt confidence in inflation.”
When asked about Italy, Draghi admitted that the Governing Council didn’t have a big discussion on the budget matter yet but assured that they have fiscal tools to utilize if needed.
For some, the ECB’s inclination for tightening on the heels of stronger inflation against the backdrop of risks from Italy and Brexit might be a recipe for disaster.
More Fed hawkishness
The latest addition to the Fed board, appointed by the POTUS himself, Richard Clarida stepped up to the podium to share his thoughts on the economy and monetary policy.
But contrary to Trump’s view on Fed tightening, Clarida acknowledged that the gradual pace of hikes could be appropriate as data continues to come in line with expectations. He explained that lower taxes are tailwinds for the economy and that there’s even scope for the jobs market to strengthen without sounding off alarms in inflation.
Some risk-on flows
Stocks and commodities chalked up a bit more green throughout the day, carrying on from the positive performance in the previous trading session. Positive earnings data and some bargain-hunting led these rebounds.
- Dow 30 index is up 401.13 points to 24,984.55 (+1.63%)
- Nasdaq is up 209.94 points to 7,318.34 (+2.95%)
- S&P 500 index is up 49.47 points to 2,705.57 (+1.86%)
Gold returned some of its safe-haven winnings while crude oil held its ground.
- The precious metal is down to $1,231.76 (-0.37%)
- WTI crude oil ticked up to $67.08 per barrel (+0.67%)
Major Market Mover(s):
The Aussie held on to most of its gains from the earlier session and went for more as the risk-on flows carried on.
AUD/USD bounced from .7071 to a high of .7100 but retreated to .7081; AUD/JPY climbed from 79.50 to 79.77; EUR/AUD fell from 1.6093 to a low of 1.6050, and AUD/CAD popped back up from .9225 to a high of .9276.
EUR & GBP
The shared currency ticked higher on Draghi’s confident inflation assessment and his not-so-worried view on Italy but eventually slipped when the discussion turned to hard Brexit preps.
Sterling continued to bleed throughout the day as the clock keeps ticking closer to a “no deal” Brexit. Word on the street is that PM May’s Brexit team has still been unable to agree on a plan and that the BOE has told banks to get their cash cushions ready.
EUR/USD jumped to 1.1433 then tumbled back down to 1.1356; EUR/JPY hit a high of 128.40 then slumped to 127.72; EUR/GBP is up to .8870; EUR/NZD fell back to 1.7425, and EUR/CAD fell from 1.4930 to 1.4870.
GBP/USD slid from 1.2903 to a low of 1.2797; GBP/JPY slid from 144.86 to 144.02; GBP/AUD is down to 1.8111, and GBP/CHF fell to 1.2818.
Watch Out For:
- 11:30 pm GMT: Japanese Tokyo core CPI y/y (no change from 1.0% expected)
- All eyes on U.S. Q3 advanced GDP due later. Here’s what you need to know.