Price action was rather choppy during today’s morning London session, likely because traders were waiting on what ECB Overlord Draghi has to say during the ECB presser.
The euro was broadly higher during the session, however, although it did give back some of its gains when the ECB announced that it kept its policy unchanged while maintaining its easing bias on its QE program.
As for other currencies of note, first up is the Greenback since it was the worst-performing currency of the session, even though there were no apparent catalysts.
The yen and the Aussie were noteworthy as well, since the former was the second weakest currency while the Aussie almost scored a win against the euro when the euro gave back its gains in the wake of the ECB statement.
- German industrial production m/m: 0.0% vs. 0.5% expected, -1.1% previous
- German industrial production y/y: 4.0% vs. 4.6% expected, 2.4% previous
- French trade balance: -€6.0B vs. -€4.5B expected, -€4.9B previous
- Swiss foreign currency reserves: CHF 717B vs. CHF 715B previous
- U.K. Halifax HPI m/m: 1.1% vs. 0.2% expected, 0.7% previous
- Euro Zone revised Q2 GDP q/q: unchanged at 0.6% as expected
- ECB maintained refinancing rate at 0.00%
- Marginal lending rate maintained at at 0.25%
- Likewise, deposit rate maintained at -0.40%
- QE extension until December 2017 (or beyond) at €60B per month affirmed
- ECB did not remove easing bias on QE program as expected
- No hints on future tightening/tapering plans
- ECB presser coming up; watch it live here
ECB monetary policy decision
As expected, the ECB announced in its official press statement that it was maintaining its current monetary policy. The refinancing rate is therefore still at 0.00%, the marginal lending rate is steady at at 0.25%, and the deposit rate is unchanged at -0.40%.
In addition, the ECB affirmed that its extended QE program will maintain its monthly pace of €60 billion “until the end of December 2017, or beyond, if necessary.”
Also as expected, the ECB retained its easing bias on its QE program by saying that (emphasis mine):
“If the outlook becomes less favourable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, the Governing Council stands ready to increase the programme in terms of size and/or duration.”
No surprises there. In fact, today’s official press statement is a copy-paste of the ECB’s July official press statement. I kid you not.
Anyhow, market players are now waiting on what ECB Overlord Draghi has to say, so do keep an eye on the euro.
By the way, you can watch the ECB presser by clicking here, if you’re interested.
Risk-taking ahead of ECB presser
Europe was in an upbeat mood during today’s morning London session, since the major European equity indices were glowing gamma green.
According to market analysts, the general risk-on vibes was likely due to expectations that the ECB will maintain its accommodative monetary policy. Although the strong performance of automobile companies also helped to support risk-taking.
However, expectations that the ECB woudl maintain its easy monetary policy also apparently applied bearish pressure on banking shares since banks benefit when from the higher interest rates and higher yields when monetary policy is tightened.
Anyhow, if risk sentiment is really tied to the ECB monetary policy, then sentiment could still turn, depending on what Draghi has to say later.
- The pan-European FTSEurofirst 300 was up by 0.46% to 1,476.56
- Germany’s DAX was already up by 1.14% to 12,354.00
- The blue-chip Euro Stoxx 50 was up by 0.91% to 3,466.50
U.S. equity futures were also in the green.
- S&P 500 futures were up by 0.02% to 2,465.75
- Nasdaq futures were were up by 0.09% to 5,960.62
Major Market Mover(s):
The euro was the best-performing currency of the session, likely because forex traders were hoping against hope that the ECB would provide some hints about its future tightening plans.
Unfortunately for the euro, the ECB’s official press statement was a verbatim copy of the previous press statement. And that apparently disappointed some euro bulls, since the euro gave back some of its gains.
The euro was able to keep most its gains (except against the Aussie), though, which is why the euro ended up as the best-performing currency of the session.
That may change depending on what ECB Overlord Draghi has to say during the ECB press, however.
EUR/USD was up by 45 pips (+0.38%) to 1.1973, EUR/JPY was up by 27 pips (+0.20%) to 130.37, EUR/CHF was up by 6 pips (+0.05%) to 1.1409
The Greenback was the weakest currency of the session, even though there were no apparent catalysts for the Greenback’s weakness.
It is possible, however, that European traders were pricing in the disappointing news about FOMC Vice Chair Fischer’s resignation since that likely helped to cloud the outlook on the Fed’s path to hiking.
CHF/JPY was up by 19 pips (+0.17%) to 114.26, GBP/JPY was up by 37 pips (+0.26%) to 142.59, CAD/JPY was up by 13 pips (+0.15%) to 89.38
The yen was the second weakest currency after the Greenback during today’s morning London session. And that’s very likely due to dampened safe-haven demand for the yen, given the risk-on vibes in Europe.
USD/JPY was down by 18 pips (-0.17%) to 108.88, USD/CHF was down by 32 pips (-0.34%) to 0.9528, USD/CAD was down by 38 pips (-0.31%) to 1.2181
The risk-friendly environment may have been toxic for the safe-haven yen, but it was good for the higher-yielding currencies, especially the Aussie.
AUD/USD was up by 38 pips (+0.48%) to 0.8022, AUD/JPY was up by 27 pips (+0.31%) to 87.35, AUD/NZD was up by 13 pips (+0.12%) to 1.1134
Watch Out For:
- 12:30 pm GMT: ECB press conference; watch it live here
- 12:30 pm GMT: Canadian building permits (-1.5% expected, 2.5% previous)
- 12:30 pm GMT: U.S. initial jobless claims (242K expected, 236K previous), non-farm productivity (1.2% expected, 0.9% previous), and unit labor costs (0.4% expected, 0.6% previous)
- 2:00 pm GMT: Ivey PMI (61.3 expected, 60.0 previous)
- 3:00 pm GMT: U.S. crude oil inventories (4.1M expected, -5,4M previous)