EUR/USD broke through 1.25 despite European Central Bank President Draghi's warning that euro volatility creates uncertainty. This is the strongest level that we've seen the currency trade since December 2014. While investors were worried that jawboning by Draghi would drive the currency lower, as the euro continued to rise into the rate decision, they priced in his concerns and shifted their focus to guidance. As we wrote in yesterday's ECB preview, given the strong uptrend in the euro, jawboning alone may not be enough to stop the currency from hitting 1.25 and that was exactly what we saw today. EUR/USD took out stops and spiked above this level as soon as the market realize that above all else, the ECB is optimistic and satisfied with the performance of the economy. According to Draghi, economic momentum remains solid and broad based, which could lead to positive growth surprises and gradual increases in core inflation over the medium term. Although he downplayed the ECB "minutes" and said not much has changed in October, his emphasis was on the strong performance of the economy supported the rally in the currency. Now that 1.25 has been broken, the 100-month SMA at 1.2572 is resistance and beyond that, the next key level is 1.30. 

Investors continued to sell U.S. dollars today as they viewed Mario Draghi's focus on growth and comparatively mild emphasis on the strong euro as an endorsement to the recent moves in the forex market. Although the ECB's apathy does not mean that policymakers in other countries are not concerned, until their concerns are vocalized, investors will attribute their lack of comment as a lack of concern about their currencies. We've already heard from Swiss National Bank President Jordan who said they are ready to intervene in the FX market if necessary. However the longer these uptrends continue particularly in AUD and NZD, the greater the risk of jawboning by other central banks. At the same time, U.S. data continues to weaken with new home sales falling more than expected and jobless claims increased. Fourth quarter GDP numbers are due for release on Friday along with the trade balance and durable goods orders. Q4 GDP is the most important piece of U.S. data on this week's calendar so it could have a significant impact on the greenback. We are looking for growth to slow as trade and retail sales activity weakened towards the end of the year. 

GBP/USD soared alongside the euro, taking out 1.43 in the process. No economic reports were released from the UK today so the currency moved on the momentum of the U.S. dollar alone. Like the U.S., fourth quarter UK GDP numbers are due for release tomorrow. Quarterly growth is expected to remain unchanged but on an annualized basis, growth is expected to slow. Q4 GDP is significant enough to trigger profit taking in GBP/USD if it falls short of expectations but like Eurozone data, UK data has been on a positive trend. GBP/USD hit its strongest level since June 2016 and there's no major resistance until 1.45. 

All 3 of the commodity currencies traded higher today. Hotter than expected Canadian retail sales growth helped to drive USD/CAD lower for the fourth consecutive trading day. Although consumer spending rose by only 0.2% which was sless than expected, retail sales ex autos jumped 1.6% which was significantly stronger than the market's 0.9% forecast. Fueled by a strong labor market and booming economy, spending on electronics and appliances rose 12.9%, the largest one month increase for this sector ever. Rising gas prices also contributed to the gains. Investors seemed to shrug off Bank of Canada Governor Poloz comment that they remain data dependent. NAFTA talks are going better than most anticipated with Canada's chief NAFTA negotiator saying the mood is still constructive while Trump said "I think we have a good chance of renegotiating NAFTA, but we'll have to see." Consumer prices are due for release tomorrow and after last month's strong price growth, a slowdown is expected. No economic reports were released from Australia but the New Zealand dollar shrugged off slower Q4 CPI.

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