EUR Relatively Muted As Draghi Reiterates ECB’s Commitment to Inflation Target

Orbex Market Flash

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USD Keeping Quiet

Its been a stagnant week so far for the US dollar. The index is continuing to tread water in the middle of the 97.10–97.68 range. A lack of key US data has seen focus shift elsewhere with little on the slate for today’s US session. The only release is a speech from Fed’s Brainard which is unlikely to be market moving.

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Draghi on Watch

EURUSD remains hemmed in against the broken 1.1217 level which has capped upside advances of the last week of trading days. EUR remains weighed down by concerns over the health of the Eurozone economy. Draghi reaffirmed ECB’s commitment to the 2% target inflation earlier in a speech. Markets watched his comments closely ahead of the upcoming ECB meeting in June but the reactions were rather muted. Traders were especially keen to gauge the likelihood of a rate hike this year. Market participants were perhaps expecting a mention of rate hikes being pushed out to next year but Draghi maintained the same rhetoric as he did at the last ECB meeting.

Pound Getting Pummelled

GBPUSD has extended this week’s decline over the European morning today with rate pushing to 1.3022 last. Political uncertainty in the UK, as well as the BOE remaining on hold for the foreseeable future, has done little to inspire confidence in GBP bulls. Friday’s rally is now seeming like a knee jerk reaction rather than the start of a move.

Risk Aversion Growing

It’s also been a subdued week for risk markets given the double whammy from President Trump. The US leader announced that the current 10% levies on $200 billion of Chinese goods will rise to 25% as of Friday. By Trump doing this, the trade was has been reignited. Warships have also been sent to the Middle East in an escalation of tensions between the US and Iran. SPX500 is now testing the 2872.76 level again following briefly piercing below the level yesterday.

Safe Havens Soaring

The risk-averse tone which has bloomed over the week has allowed for better trading in the safe havens. Both Gold and the Japanese yen are trading higher against the US dollar. USDJPY has continued its decline this week following the gap lower at the week’s open. The rate is trading at 110.01 last as the JPY rallies hard on safe haven inflows. Gold prices have been similarly buoyant with XAUDUSD breaking back above the 1280.58 level to challenge last week’s highs at 1288.

Crude Capped

Crude oil has been back under pressure again today with price trading 61.18 last, though still above the 60.47 support for now. The market of currently caught between opposing themes of potential demand disruption from an escalation in the US/China trade war and potential supply disruption from rising Middle East tensions. Looking ahead today, traders wait for the weekly EIA report following yesterday’s API report which indicated a third consecutive weekly build in US crude stocks.

Commodity Currencies Weaker in Risk-Off Environment

A neutral USD has kept the focus on oil prices for CAD traders leading USDCAD mildly higher over the day so far to trade 1.3480 last. Pressure remains tilted to the upside with price continuing to push against the 1.3460–1.35 resistance area. A further bearish report from the EIA could be enough to fuel a run above the level later today. However, it will depend on the moves we see in crude.

Following a rally yesterday in response to the RBA keeping rates on hold, despite growing expectations of a cut, AUDUSD was back down again today with the .7021 level acting as resistance to an early bullish move seen in response to the RBNZ rate cut.

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