Forex Afternoon Key Notes
- Australia retail sales m/m up 0.4% vs. 0.1% expectations. Previous month revised upwards to 1.3% from 1.2%
- Halifax house price index up 8.2%; monthly change 0.4%
- BoE keeps interest rates unchanged at 0.5%
- ECB keeps interest rates unchanged at 0.05%
- Draghi puts off QE to Q1 2015
- US initial jobless claims 297k vs. 295k. Last week claims revised upwards to 314k
Markets opened on a cautious tone as the USD continued to lead the way strengthening against the Yen, Euro and the Australian dollar. Despite a better than expected Australian retail sales, the Aussie could not hold on to the gains and eased soon enough trading below the 0.84 handle briefly
The UK’s Central bank held interest rates unchanged and the GBPUSD was largely unchanged. Focus now shifts to the BoE minutes for guidance on the voting pattern, although it is widely expected that the voting pattern would remain the same with 2 dissenters. Any change to the status quo could be either very bullish or bearish for the Cable. At the time of writing, the Cable was trading higher intraday near 1.57 handle.
The much anticipated ECB press conference saw the markets in a short squeeze. EURUSD staged a bullish reversal from lows of 1.23 trading as high as 1.24 during the press conference. The Euro rallied on account of an unchanged statement with Draghi reiterating that “the ECB remains unanimous in its decision for a flexible monetary policy”.
The ECB’s press conference was widely expected to remain unchanged in view of the TLTRO auctions due next week. To add fuel to the fire, when questioned about the time frame for QE, Draghi was savvy enough to state that there was no timetable and that the ECB could decide on QE during any of the 3 monetary policy reviews in the Q1 of 2015. Draghi also iterated that falling crude oil prices were being monitored, at the same time reflecting on the fact that the ECB needs to wait to see the effects of the existing measures already undertaken by the ECB. Clearly, this was not what the markets were expecting, which resulted in a Euro broad based strength across the board.
Data from the US was limited to the weekly jobless claims which rose more than expected for the second week in a row. Analysts once again point to the harsh weather that has engulfed the US the past weeks but consensus is strong for a robust NFP growth, upwards of 230K at the very least, due to be released tomorrow.
It was only yesterday that the Fed’s Beige Book revealed some broad based job gains providing a boost the employment indicator and markets are likely to head into tomorrow’s NFP with this in mind. Traders however should bear in mind that the Dollar Index is trading near a major multi-year resistance level, which could create some headwinds for the Greenback. At the time of writing, the US Dollar Index saw a sharp reversal from the resistance of 89.20 levels as noted in our weekly Dollar Index analysis. A close below 88.25 could pave way for a corrective decline to 87.5 levels.