Euro recovers off lows ahead of ECB decision today

United States Dollar:

GBP/USD today trades within its usual range. It started off on the back foot yesterday morning, following the release of weaker than expected Manufacturing PMI printing at 51.6 vs. expectations for 52.6. The dollar was also broadly stronger, but it slowly shed these gains as the afternoon’s US economic data came in slightly weaker than expected; Final Manufacturing PMI, ISM Manufacturing PMI and Construction Spending all came in under market expectations. The better than expected ADP Non-Farm Employment failed to prevent the dollar losing ground, as GBP/USD topped out at 1.6248. The pair then dropped back again as the New York session came to a close and touched on 1.6248 again overnight. It has found the ‘1.6250 level’ too difficult to break so far.

In other news, Bank of England MPC member Kristin Forbes spoke on sterling yesterday evening. She said, “sterling’s past moves have reduced the risk of inflation increasing sharply, despite the strong growth in employment and the overall economy,” and went on to say “but as these calming effects on inflation gradually dissipate, it will become even more important to monitor prospective signs of domestic price pressures to avoid the troublesome inflation sprite.” These comments haven’t had a huge impact on the pound but are pertinent to future direction of BoE monetary policy. GBP/USD opens this morning at 1.6190. UK Construction PMI is due today, but most of the market’s attention will be on the ECB’s monetary policy decision early this afternoon.  

Euro:

EUR/USD has been fairly steady during the last 24 hours, having slowly appreciated and touched a high of 1.2674 overnight. Traders have understandably been reluctant to do much ahead of today’s ECB monetary policy announcement and accompanying press conference. The consensus feeling is that the central bank will not make any further changes to monetary policy this time around, but one can expect ECB President Draghi to leave the door open for further easing in the months ahead. Mario was speaking in Naples yesterday and sounded unsurprisingly dovish, saying, “it sometimes seems as though just as we defeat one challenge, such as the sovereign debt crisis, two new challenges spring up, such as low inflation and a weak recovery”. EUR/USD opens this morning at 1.2630 and GBP/EUR remains above 1.28 for now at 1.2815.

Aussie and Kiwi Dollars:

NZD/USD gapped higher from .7842 to .7925 overnight. There wasn’t any top tier NZ economic data released overnight, and although there were cuts to forecasted Fonterra milk prices, the kiwi actually rallied. Some large orders were triggered in NZD/USD and this supported the move higher. Moves in AUD/USD have been less wild but it has nonetheless made good gains overnight, topping out at .8815. Like other commodity currencies, it is holding on to its gains this morning and trades at .8790 currently. A solid print in Australian building approvals data also gave the Aussie a boost. The two currencies are stronger vs. the pound too and GBP/AUD and GBP/NZD trade at 1.8425 and 2.0570 respectively.

Date Releases for the next 24 hours:

AUD: AIG Services Index

EUR: PPI m/m, Minimum Bid Rate, ECB Press Conference 

GBP: Construction PMI

NZD: No data 

USD: Challenger Job Cuts y/y, Factory Orders m/m