mask Draghi's speech hurts EUR

07/ 02/ 2017

Draghi's speech hurts EUR

Daily Update - 07th Feb 2017

Yesterday’s Market

  • AUD Retail Sales
  • EUR ECB President Mario Draghi speech
  • USD Labor Market Conditions Index & FOMC Member Harker Speech

Yesterday Explained

Retails sales report from Australia came out negative than expected but did not hurt AUD. The highlight of yesterday was the speech by ECB President Mario Draghi. He had a particularly dovish tone , and his refusal to consider tightening monetary policy lead to a sharp move lower for the euro as it slid down to EUR/AED 3.93 from 3.96.

The recent rise in Eurozone inflation had many wondering whether they would soon see an end to the ECB’s expansionary stance, yet by disregarding inflation as largely energy driven, He has essentially promised to maintain and even extend QE for a while yet. Labour market conditions report and FOMC Member Hakers speech did not manage to give any boost to US dollar.

A summary from his speech

  • Monetary policy support still needed for inflation pickup; inflation set to rise over coming years.
  • QE pace of EUR 60 Billion a month from April-December 2017 is confirmed.
  • Inflation is accelerating mainly due to energy prices; underlying prices pressures remain subdued.
  • Over the last 2 years the GDP per capita rose 3%, unemployment at lowest level since May'09, debt/GDP declining.

Today’s Market

  • AUD Interest Rate Decision & RBA Rate Statement
  • USD Trade Balance & Consumer Credit Change

Today’s Focus

Tuesday is a light day in terms of Economic data. Australia will release their Interest Rate Decision and RBA Rate Statement early morning. The day will end with from USA releasing their Trade Balance Data.

The Trade Balance released by the Bureau of Economic Analysis and the U.S. Census Bureau is a balance between exports and imports of total goods and services. It is an event that generates some volatility for the USD. If a steady demand in exchange for US exports is seen, that would turn into a positive growth in the trade balance, and that should be positive for the USD.

On the political front, US Court of Appeals is scheduled to hear challenge to Trump’s travel ban. Three federal judges will hear oral arguments in the challenge to the US President Donald Trump’s executive order on immigration curbs .