- The ECB triggered a sell-off in the euro which dropped to a two-year low of 1.1101.
- The advance U.S. goods trade deficit narrowed less than expected ahead of GDP.
Forex today was driven by concerns over a pending turndown in global growth as the ECB announced that fresh stimulus is on the way, sinking the euro to a fresh low of 1.1101. The U.S. dollar picked up a bid and the DXY rallied to the highest levels since mid-June with eyes now on the 98 handle ahead of tomorrow's U.S. Gross Domestic Produce and next week's Federal Reserve interest rate decision.
As for US data, the advance U.S. goods trade deficit narrowed less than expected in June to $74.2bn from $75bn which helped to provide upward pressure on US 10-year yields which rose 4bp to 2.084%. However, wholesale and retail inventories rose less than expected, which analysts at Westpac argue will be prompting downward revisions to Q2 GDP expectations (due Friday) despite the strong durable goods orders. As for the ECB, the statement was very dovish, as expected, laying out a very accommodative framework for monetary policy; albeit Draghi said the risk of recession is “pretty low”.
Analysts at ANZ explained that forward guidance is that rates will remain at current levels or lower at least through the first half of 2020: "To open up room for lower interest rates, the ECB is examining options for tiering the deposit rate in order to minimise the impact on bank profitability, and it is also looking at possible additional QE. Euro area surveyed manufacturing data has been terrible recently. Both the inflation and growth outlooks are deteriorating and we expect the ECB to deliver a comprehensive, broad package of unconventional easing in September."
Indeed, the ECB triggered a sell-off in the euro which dropped to a two-year low of 1.1101 before recovering back to 1.1185 during President Draghi’s press conference despite saying that the economy is “getting worse and worse.” The pound fell from 1.2522 to a low of 1.2436.
AUD was grinding lower following yesterday's speech from RBA Governor Lowe’s who opened the door for lower rates. AUD fell to an 11-day low of 0.6932 overnight. NZD underperformed falling to 0.6650 order territory while USD/JPY shot up from 108.04 to a high of 108.75.
Key notes from Wall Street
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD regains traction, recovers above 1.0700
EUR/USD regained its traction and turned positive on the day above 1.0700 in the American session. The US Dollar struggles to preserve its strength after the data from the US showed that the economy grew at a softer pace than expected in Q1.
GBP/USD returns to 1.2500 area in volatile session
GBP/USD reversed its direction and recovered to 1.2500 after falling to the 1.2450 area earlier in the day. Although markets remain risk-averse, the US Dollar struggles to find demand following the disappointing GDP data.
Gold climbs above $2,340 following earlier drop
Gold fell below $2,320 in the early American session as US yields shot higher after the data showed a significant increase in the US GDP price deflator in Q1. With safe-haven flows dominating the markets, however, XAU/USD reversed its direction and rose above $2,340.
XRP extends its decline, crypto experts comment on Ripple stablecoin and benefits for XRP Ledger
Ripple extends decline to $0.52 on Thursday, wipes out weekly gains. Crypto expert asks Ripple CTO how the stablecoin will benefit the XRP Ledger and native token XRP.
After the US close, it’s the Tokyo CPI
After the US close, it’s the Tokyo CPI, a reliable indicator of the national number and then the BoJ policy announcement. Tokyo CPI ex food and energy in Japan was a rise to 2.90% in March from 2.50%.