Waiting game

The Day So Far…

After a Draghi fuelled session yesterday the coast has cleared and little has occurred thus far. Looking back in hindsight the EUR reaction to the press conference does start to become more clear in the sense that even in spite of the hawkish repricing of assets post the Sintra meeting the ECB President felt no need to tweak his language going forward. Attention now turns to the Autumn which when questioned by the press Draghi was clear to say state that this specific time frame was intentional which as expected means he has not pre-committed to one single point in time. Looking at the schedule of meetings for the rest of the year I would anticipate a more thorough review of current economic conditions and parameter changes in September to then be followed by an announcement at the October 26th meeting, a view shared by Reuters sources earlier this morning.

Looking at other news of note the AUD saw some movement overnight following comments from the deputy governor of the RBA who said that the board’s discussion on a neutral rate at its July policy meeting should not be interpreted as a signal of plans to tighten policy. Interesting Debelle also tried to distance the Bank from a growing idea of central bank coordination suggesting that since Australia’s rates didn’t fall as much as their counterparts then it doesn’t automatically mean they have to follow suit in the push towards tightening. The initial headlines did prompt an aggressive fall in the AUD overnight but much of the move as already been taken back as we enter the US session.

 

The Day Ahead…

The sharp move the EUR yesterday can not be pinned entirely on Draghi, and at the sake of losing top billing in the press, Trump was quick to re-emerge in the headlines as news broke that Special Counsel Robert Mueller is to widen the probe investigating the President’s business activities. Headlines of such nature bring about the same concerns that prompted short-term selling several weeks when it was speculated that Trump had had inappropriate dealings with the Russian’s. In response, Trump’s lawyers are said to be exploring ways to limit or undercut Mueller’s Russia investigation and are building a case against that they allege are his conflicts of interest, according to the Washington Post. Personally, I think the market has moved on from these type of headlines and other than a fleeting sell-off when the news hits I believe we will need to have a substantial elevation in news around Trump’s legitimacy as President if it were to have a more long lasting impact.

In terms of the strategy for today given the context of what we have discussed above I prefer to follow the trend higher in EUR/USD with an entry eyed at pivot. Meanwhile, it remains hard to short equities so if we pull-back to S1 we look to reiterate the long, while in crude oil we look to short from yesterday’s high of $47.74.