Forex headlines for April 3, 2014:
Headlines from Draghi:
- Draghi: Moderate recovery proceeding as expected
- ECB unanimous on using unconventional tools if needed
- ECB does not exclude further easing
- Upside and downside risks to inflation broadly balanced over medium term, upside and downside risks limited
- Geopolitical and FX risks will be monitored closely
- There was a ‘rich and ample’ discussion of QE
- The longer the period of low inflation, the higher the risk
- Draghi: We discussed the possibility of negative deposit rates
Other headlines:
- ECB leaves interest rates on hold
- Full statement from the April ECB monetary policy meeting
- March US ISM non manufacturing PMI 53.1 vs 53.5 exp
- US initial jobless claims 326k vs 317k exp
- March US Markit services PMI final 55.3 vs 55.5 exp
- March US Challenger layoffs 34,399 vs 41,835 prior
- US Feb trade deficit $42.3B vs $38.5B expected
- Canadian February trade balance $0.29B vs +$0.20B expected
- Fed’s Jeremy Stein to resign on May 28th
- Gold down $2 to $1287
- WTI crude up $0.67 to $100.29
- S&P 500 down 2 points to 1889
- USD leads, CHF lags
The market went into the Draghi press conference on edge and on the prepared statement, the knee jerk was higher after he didn’t deliver anything new. The big move came in the Q&A where Draghi didn’t commit to doing anything new or give any reason to think anything is coming in the near term but was able to leave the impression that everything is on the table and could be used at any point. It was a masterful performance and knocked EUR/USD as low as 1.3698.
We were expecting more stops below 1.3700 but it bounced almost instantly and legged out the rest of the day between 1.3710 and 1.3730.
Cable followed the same path as EUR/USD but found some support at 1.6570, then put a little double bottom on the chart and bounced up to 1.6597. It’s rounding out the day at the highest levels of the US afternoon.
USD/CAD is just amazing. It tested 1.1000 for the fourth or fifth time and came within a few pips (once again) and then shot higher. Last at 1.1038. That 1.1000 level is huge.
AUD/USD was out of the spotlight. It slumped along with risk trades as the ISM numbers left the market with a bit of a sour taste about the potential for a snap-back in March/April data. Overall, it ranged between 0.9215 and 0.9245.
The Swiss franc was a real puzzle. It was a dog and for no great reason. EUR/CHF rose near a 10-week high even though the euro was generally weak and risk trades struggled.
