Euro weakens on geo-political concerns

Today's Highlights

Euro weakens on geo-political concerns

Risk aversion set to continue

Inflation projections downgraded by RBA

FX Market Overview

Yesterday the ECB meeting was a bit of a non-event. The European Central Bank delivered no new measures and President Draghi's comments at the following press conference were benign and did little to shift expectations of further easing in the immediate future. He did mention that he was pleased with the weakness in the Euro. The policy divergence between the ECB and other major central banks , notably the Bank of England and the Federal Reserve is now stark and I would expect the Euro to struggle to maintain any rallies.

Risk aversion is still the order of the day as tensions mount in the Ukraine and the Middle East. This was exacerbated yesterday with the news that President Obama has authorised the use of targeted airstrikes in Northern Iraq to protect US troops. Stock markets headed lower and it's unsurprising that investors are looking for safer havens. Expect the dollar to remain supported particularly if the geo political tensions escalate.

Overnight the Reserve bank of Australia in its statement of monetary policy downgraded inflation projections. Markets have already begun to price in rate cuts after Thursdays very poor employment data as it appears increasingly likely that policy makers may be forced to act to stimulate the economy. The Australian dollar may well continue to weaken despite tentative signs of some strength in the Chinese economy.

Today is light on the data front with only the Canadian unemployment rate and second tier US data due to be released. Current trends should prevail as risk appetite continues to wane.