The euro initially rallied as the ECB announced it would cut back bond purchases to 60 billion euros per month but after Draghi spoke the market reversed and the euro tumbled to 1.06. On the day, the Canadian dollar led the way while the euro lagged. Chinese CPI is due later. 2 new trades have been issued in EUR and CAD.
The message from the Draghi was that the ECB would be in the bond market for a long time to come. Initially, the market interpreted the diminished pace of bond buying as a sign the program could end at this time next year but Draghi said cutting purchases to zero was never discussed. EUR/USD fell more than 200 pips as the ECB leader spoke.
The market was left with the message that QE could continue for many months to come and that was likely precisely the message Draghi wanted to send. It puts the ECB on the dovish side of the curve and that would be something easy enough to roll back if inflation ever appeared to be turning a corner.
For the euro, the drop puts it back within the danger zone of the 2015 lows. If those levels hold into the weekend, the market may be inclined to wait until the Fed before trying for a break.
What was interesting in the bigger picture was the divergence with bonds. Eurozone yields moved up across the board, especially in the periphery. That's sending the opposite of a dovish signal. That may simply reflect bondholders who had waited to sell but it will be a critical divergence to watch in the day ahead.
Other economic news showed initial jobless claims at 258K compared to 257K expected. The Canadian dollar got a boost from an 8.7% jump in October building permits compared to -0.7% expected.
Looking ahead, Chinese CPI is due at 0130 GMT. With the market so focused on Trump and central banks, China almost seems like an afterthought but it could easily topple the delicate positive sentiment in markets. CPI inflation has been tracking higher and is forecast up 2.2% y/y compared to 2.1% y/y in Sept. Even a higher reading is likely to be ignore, at least for now.
Trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading and seek advice from an independent financial advisor if you have any doubts.
Recommended Content
Editors’ Picks
EUR/USD clings to gains near 1.0700, awaits key US data
EUR/USD clings to gains near the 1.0700 level in early Europe on Thursday. Renewed US Dollar weakness offsets the risk-off market environment, supporting the pair ahead of the key US GDP and PCE inflation data.
USD/JPY keeps pushing higher, eyes 156.00 ahead of US GDP data
USD/JPY keeps breaking into its highest chart territory since June of 1990 early Thursday, recapturing 155.50 for the first time in 34 years as the Japanese Yen remains vulnerable, despite looming intervention risks. The focus shifts to Thursday's US GDP report and the BoJ decision on Friday.
Gold closes below key $2,318 support, US GDP holds the key
Gold price is breathing a sigh of relief early Thursday after testing offers near $2,315 once again. Broad risk-aversion seems to be helping Gold find a floor, as traders refrain from placing any fresh directional bets on the bright metal ahead of the preliminary reading of the US first-quarter GDP due later on Thursday.
Injective price weakness persists despite over 5.9 million INJ tokens burned
Injective price is trading with a bearish bias, stuck in the lower section of the market range. The bearish outlook abounds despite the network's deflationary efforts to pump the price.
Meta takes a guidance slide amidst the battle between yields and earnings
Meta's disappointing outlook cast doubt on whether the market's enthusiasm for artificial intelligence. Investors now brace for significant macroeconomic challenges ahead, particularly with the release of first-quarter GDP data.