Forex headlines for September 4, 2014:
ECB and Draghi:
- ECB announces ABS purchase program
- ECB also announces covered bond buying program
- Size of program not announced, details to be released Oct 2.
- ECB purchases will include ABS backed by real estate and “loans to the real economy”
- Draghi: Today’s action was oriented toward credit easing but we will also buy assets outright
- Draghi: Decision wasn’t unanimous and rates are now at the lower bound
- Draghi: ECB wants to bring balance sheet back to 2012 levels (means adding approx 1T euros)
- Draghi: Sovereign QE was discussed
- ECB growth/inflation forecasts cut slightly
- More ECB forecasts
- IMF’s Lagarde says ECB moves will help counter low inflation risks
Other data and headlines:
- August 2014 US ISM non-manufacturing PMI 59.6 vs 57.7 exp (nine-year high)
- ISM employment 57.1 vs 56.0 (highest since Feb 2006)
- August 2014 ADP employment report 204k vs 220k exp
- Initial jobless claims came in at 302K vs. 300K estimate
- August 2014 US Markit services PMI final 59.5 vs 58.5 exp
- US non-farm productivity Q2 final +2.3% vs +2.4% exp
- US July trade deficit $40.5B vs $42.4B expected
- Schaeuble says Germany may miss 1.8% GDP target this year
- Fed’s Mester says US economy on firmer ground than it’s been on for some time
- Mester: Current Fed forward guidance is “a bit stale”.
- Income disparities widened in 2010-2013, Fed survey says
- EURCHF trades at lowest level since November 2012
- Gold down $6 to $1263
- WTI crude down $1.03 to $94.51
- S&P 500 down 3 points to 1998
- US 10-year yields up 5 bps to 2.45%
- German 10-year yields flat at 0.97%
- CAD leads, EUR lags
Draghi threw just about everything possible at the eurozone economy today and even hinted that some members of the Governing Council want sovereign QE. The market wasn’t impressed after first and part of it is all the confusion about what is and what isn’t QE. Plus Draghi didn’t drop a dollar figure which didn’t make the optics the greatest. Ultimately, the euro cracked hard on the second break below 1.3000. Better ISM numbers also gave the US dollar a lift and it was a one-way ride down to 1.2920 in the largest euro one-day fall in months.
The pound followed the euro down in a more-or-less one way move down to 1.6307 from 1.6425. Referendum worries also weighed.
The commodity bloc wasn’t sure which way to go. The first move was higher as the easing from Europe is good news for the global economy but later the flood into US dollars — probably from Europe — sparked a reversal. AUD/USD ran to 0.9293 and then back to 0.9245 in a round trip. NZD/USD lost a bit more than it gained as it rallied to 0.8350 and then to a session low at 0.8298. The Canadian dollar was able to hang onto some gains and USD/CAD finished at 1.0876 after falling as low as 1.0820.
You can also check out today’s video that I didn’t with Dale from FXStreet