Market wrap: Euro volatile on accounts of ECB’s Jan meeting - Westpac

Analysts at Westpac explained that the euro was briefly volatile on the accounts of the ECB’s Jan meeting. 

Key Quotes:

"As we already knew from President Draghi’s press conference, there had been a discussion about tweaking the language around the policy bias to reflect the improvement in the economy but “changes in communication were generally seen to be premature at this juncture, as inflation developments remained subdued.” Currency volatility was also noted as an area requiring monitoring, a topic which was less veiled at the press conference where Draghi pointedly referred to US Treasury Secretary Mnuchin’s comments on USD.

On the data front, Germany’s IFO business survey slipped more than expected in Feb, but remains very strong in historical context. UK’s Q4 GDP was revised down (+0.4% q/q, initially +0.5% q/q) on its second release due to lower business investment (0.0%, prior +0.4%) and private consumption (+0.3%, prior +0.4%).

EUR/USD bounced from 1.2260 to 1.2352, some time after the ECB headlines and without obvious catalyst. GBP/USD dipped to a low of 1.3857 after the GDP data but soon joined the wave of US dollar selling, recovering to above 1.3960.

USD/JPY fell about 1% over the day, to 106.65, the yen strongest in the G10. AUD/USD rose from 0.7800 to 0.7850/60. NZD rose from 0.7310 to 0.7365. AUD/NZD arrested a multi week decline, firming from 1.0655 to 1.0690.

US 10yr treasury yields pared the previous day’s gains, falling from a three-year high of 2.95% to 2.91%, while 2yr yields slipped from 2.27% to 2.25%. In Fedspeak, Quarles expected further gradual tightening, Bullard warned of too many rate hikes, and Bostic said things were looking up. Fed fund futures yields continued to price the chance of another rate hike in March as effectively a done deal with a total of four hikes priced by end-2019."