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Head honcho Draghi wasn’t exactly the cheeriest of fellas during the ECB presser but the euro managed to stay resilient. The Greenback, on the other hand, ended the day in the red despite talks of tax reform as Hurricane Irma poses another threat to growth.

  • ECB head Draghi: Euro appreciation led to tighter financial conditions
  • Draghi: Had preliminary discussions on QE, bulk of decisions to be made in October
  • Draghi: Euro zone recovery is robust and broad-based, patience needed for inflation
  • Draghi: Exchange rate not a target but is also taken into consideration
  • Canadian building permits down 3.5% vs. projected 1.5% decline
  • Canadian Ivey PMI down from 60.0 to 56.3 vs. 61.3 consensus
  • U.S. jobless claims up from 236K to 298K vs. 245K forecast
  • U.S. Q2 non-farm productivity revised from 1.3% to 1.5%
  • U.S. Q2 unit labor costs lowered from 0.6% to 0.2%
  • U.S. crude oil inventories up by 4.6M barrels vs. 4.1M forecast

Major Events/Reports

ECB press conference

The ECB didn’t announce any changes to monetary policy during their official statement in the previous trading session, citing that they will maintain the monthly pace of €60 billion for its QE program until the end of December or later.

Forex junkies did detect a hint of caution during the announcement since the ECB left the door open to increasing asset purchases in terms of size and duration if financial conditions become less favorable. But since this was mostly a rehash of their July announcement, traders turned their focus on the presser instead.

During the Q&A, Draghi addressed questions on the euro’s exchange rate by saying that currency appreciation has made financial conditions “unquestionably” tighter and that trading levels are important for growth and inflation. He clarified that they’re not targeting a specific exchange rate or range but that the central bank takes this into consideration when making decisions. A bit of jawboning, some might say.

On a more upbeat note, Draghi acknowledged that the euro zone recovery has been robust and broad-based, giving policymakers confidence that inflation will continue to pick up. However, he also stressed that patience is needed in terms of inflation.

As for tapering discussions, Draghi also mentioned that they’ve started preliminary discussions on QE adjustments but that the bulk of decisions will likely be made in October. This kept market hopes up that potential tapering is still on the table, allowing euro traders to shrug off concerns about euro appreciation.

Irma outweighs tax reform talks

The Trump administration has been making more progress than usual in terms of working towards its fiscal reform goals, but it looks like the optimism is being clouded by the projected impact of severe weather conditions on overall growth.

Treasury Secretary Steven Mnuchin and House Speaker Paul Ryan emphasized that lawmakers can be able to pass the much-anticipated overhaul of the tax code before the end of the year, following this week’s agreement within Congress to extend the debt limit until December.

However, U.S. equities might have failed to pick up on these or were probably pre-occupied with crunching the numbers on potential losses for insurers related to Hurricane Harvey’s damages.

  • Dow 30 index is down 22.86 points to 21,784.78 (-0.10%)
  • S&P 500 index is down 0.44 points to 2,465.10 (-0.02%)
  • Nasdaq closed 4.55 points higher to 6,397.87 (+0.07%)

Precious metals remained supported, indicating that traders are not in the mood to increase risk appetite just yet.

  • Gold is up to $1,354.31 per troy ounce (+1.14%)
  • Silver is up to $18.214 per troy ounce (+1.70%)
  • WTI crude oil is holding steady around $49 per barrel (-0.06%)
  • Brent crude oil is up to $54.52 per barrel (+0.59%)

Mostly downbeat U.S. data

Another factor keeping a lid on the scrilla’s gains is the gloomy economic performance reflected by the latest batch of medium-tier reports.

Initial jobless claims rose from 236K to 298K to reflect more layoffs than usual, higher than the projected 245K figure. Non-farm productivity for Q2 2017 was revised from 1.3% to 1.5% which lessens the upside pressure on wages while unit labor costs were downgraded from 0.6% to 0.2%, lower than the 0.3% forecast.

On a less downbeat note, the IBD/TIPP Economic Optimism index climbed from 52.2 to 53.4, indicating stronger confidence among consumers.

Weaker than expected data from Canada

The latest numbers from the Great White North weren’t so upbeat either, but this did little to stop the Loonie from enjoying its post-BOC hike rallies.

The Ivey PMI slipped from 60.0 to 56.3 to reflect a slower pace of industry expansion instead of advancing to the consensus at 61.3. Building permits dropped by 3.5% versus the projected 1.5% decline to indicate slower activity in the construction sector as well.

Major Market Mover(s):

EUR

The euro tossed and turned during the ECB presser as bulls reeled from Draghi’s cautious remarks but later on resumed the charge.

EUR/USD is up from 1.1917 to a high of 1.2059 (+0.93%), EUR/JPY is up to 130.44 (+0.19%), EUR/NZD bounced from 1.6544 to 1.6639 (+0.55%), and EUR/GBP rebounded to .9177 (+0.46%)

USD

The Greenback logged in another session in the red as market watchers are worrying about the headwinds from Hurricane Irma.

USD/CAD tumbled from 1.2226 to a low of 1.2111 (-0.91%), USD/JPY is down to 108.43 (-0.72%), USD/CHF is testing support at the .9500 mark (-0.61%), and AUD/USD popped up to .8047 (+0.56%)

Watch Out For:

  • 12:00 am GMT: FOMC member Dudley’s testimony
  • 12:50 am GMT: Japanese final GDP (0.7% expected, 1.0% previous)
  • 12:50 am GMT: Japanese current account balance (1.65T JPY expected, 1.52T JPY previous)
  • 2:30 am GMT: Australian home loans m/m (1.0% expected, 0.5% previous)
  • 4:00 am GMT: RBA Assistant Gov Debelle’s testimony
  • Tentative: Chinese trade balance (337B CNY expected, 321B CNY previous