Analysts at Westpac offered a summary of overnight events in the financial and commodities markets.
Key Quotes:
"The ECB policy meeting turned out to be more an affirmation of the ECB’s policy stance than an early shift in guidance. Despite surprisingly dropping the risk of needing to expand asset purchases (money-printing/QE) if conditions deteriorate, the overall stance remained dovish. Forecasts changes were minimal and despite better growth prospects, inflation during the forecast period was actually lowered marginally. Of note, ECB president Draghi stated in the press conference that “victory cannot be declared yet on inflation”.
EUR/USD initially rose from 1.2380 to 1.2445 in response to the ECB written statement (which removed the conditional pledge to extend QE), but then fell following Draghi’s more cautious tone in the press conference, extending losses to 1.2300 in the NY afternoon, -0.9% on the day. This seemed to encourage the notion that the major central banks will take even longer to join the Fed in raising interest rates, making the US dollar more appealing. GBP/USD rolled over from 1.3900 to 1.3800 in a steady decline.
AUD/USD weakened in line with EUR and GBP, -0.6% on the day, easing from 0.7830 late Sydney to 0.7775 late NY. This was despite President Trump flagging an exemption for Australia from the steel and aluminium tariffs, due to the US’s trade surplus with Australia (i.e. trade must be “fair”!) and the military partnership.
USD/JPY rose only fractionally to 106.20, showing caution ahead of the BoJ meeting. NZD/USD fell just 0.3% on the day, so AUD/NZD slipped from 1.0750 to 1.0715. USD/CAD trended higher for much of local trade but slipped back on reports that Canada and Mexico would be exempted indefinitely from the tariffs, given ongoing NAFTA negotiations. That seems to leave Brazil, S Korea, Turkey and Russia to bear the brunt of the tariffs.
The US 10yr treasury yield fell 4bp, from 2.89% to 2.85%, in sympathy with German 10yr yields which fell 7bp to 0.62% following ECB Draghi’s dovish comments. US 2yr yields remained rangebound between 2.24% and 2.26%. Fed fund futures continued to price three more hikes by end-2018 (with March a 90% chance), and another hike in 2019."
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 edges lower toward 1.0700 post-US PCE
EUR/USD stays under modest bearish pressure but manages to hold above 1.0700 in the American session on Friday. The US Dollar (USD) gathers strength against its rivals after the stronger-than-forecast PCE inflation data, not allowing the pair to gain traction.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Gold struggles to hold above $2,350 following US inflation
Gold turned south and declined toward $2,340, erasing a large portion of its daily gains, as the USD benefited from PCE inflation data. The benchmark 10-year US yield, however, stays in negative territory and helps XAU/USD limit its losses.
Bitcoin Weekly Forecast: BTC’s next breakout could propel it to $80,000 Premium
Bitcoin’s recent price consolidation could be nearing its end as technical indicators and on-chain metrics suggest a potential upward breakout. However, this move would not be straightforward and could punish impatient investors.
Week ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.