Mario Draghi’s Interesting Press Conference
EUR/USD first surged just to tumble even more as he revealed what was NOT discussed at the meeting. European stock indices managed to end the day slightly higher: DE30 (+0.52%), EU50 (+0.68%).
Thursday started on a positive note due to the final US presidential debate not affecting the lead of Clinton. ECB’s Mario Draghi stirred the sentiment during the press conference when he mentioned that there was no discussion of QE extension (which raised the level of stress on equities and quickly sent EUR/USD higher).
Only a couple of minutes later did he add that QE taper was also not covered during the meeting (stocks went back, while the EUR/USD tumbled so much that it went past an important support at 1.095). Draghi seemed to have awaken the USD’s appetite for gains as it started to appreciate after the ECB conference.
US data played second fiddle Thursday. Philly Fed manufacturing index and existing home sales beat forecasts but there was also an unexpected rise in initial jobless claims.
In the commodity space there’s been some noticeable weakness yesterday afternoon linked to the USD surge which hit the G-10 commodity fx. The AUD was already weakened by poor labor market data. Oil was declining steadily throughout Thursday, WTI contracts down 2.27%, Brent -2.54%. Precious metals also got cheaper when the afternoon dollar surge began.
The pound happened to be the second strongest G-10 currency Thursday despite retail sales coming slightly below expectations while a broader look at the recent data revealed no deterioration.
Asian equity markets traded in a lackluster fashion following the weak U.S lead where declines in oil and losses in telecoms dragged sentiment down
• USD remained firm against its major counterparts which underpinned USD/JPY’s reclaim of 104.00 while EUR/USD extended on post-ECB losses which saw the pair briefly break below 1.0900
• Looking ahead, highlights include Canadian CPI and Retail Sales, ECB's Weidmann (Hawk) and Fed's Tarullo (Voter, Dove) Speaks
Asia equity markets traded in a lackluster fashion following the weak US lead where declines in oil and losses in telecoms dragged sentiment, although downside in Nikkei 225 (+0.1%) was stemmed by a weaker JPY. ASX 200 (-0.3%) was held back by underperformance in healthcare after Healthscope warned of weaker revenue growth for hospitals, while oil and gold names were pressured by the declines in their respective commodities. Shanghai Comp. (+0.4%) traded choppy after property prices continued to soar which could increase the attractiveness of real asset investments over stocks, while a stronger Peoples Bank liquidity injection and typhoon which kept Hong Kong markets closed for trade further added to the indecisiveness. 10yr JGBs saw uneventful trade with the BoJ absent from the market while Kuroda comments also failed to provide any new surprises.
- Chinese All New Home Prices (Sep) Y/Y 11.20% (Prev. 9.20%)
- China home prices rose M/M in 63 out of 70 cities (Prev. 64) and rose Y/Y in 64 cities (Prev. 62).
The Peoples Bank of China sets mid-point at 6.7558 (Prev. 6.7311); Peoples Bank of China also weakens reference rate by most since August. Peoples Bank of China injected CNY 70bln in 7-day reverse repos, CNY 40bln in 14-day reverse repos and CNY 50bln in 28-day reverse repos for a net weekly injection of CNY 95.5bln vs. last week's net drain of CNY 415bln.
Bank of Japan Governor Kuroda said it is possible to revise the timeframe to reach the 2% inflation target at the next policy meeting. Kuroda also commented that they could ease long-end buying if 10-year yields decline below target and that some in the Bank of Japan wanted a steeper yield curve.
German Finance Ministry stated that the economy remains firm despite global weakness, while the ministry also added that exports are to grow only slightly for the rest of the year and industrial production is to provide a small boost in Q3.
UK PM May is expected to tell EU leaders that UK aims for minimal Brexit disruption and that a breakup of the EU is not in the interests of UK. Furthermore, PM May is also expected to announce that repealing the EU treaty will take 1 year.
EU's Tusk said UK PM May confirmed that article 50 will be triggered by end-March next year, while he added that no formal negotiations will occur until the process begins and that he hopes the Brexit decision will be reversed.
USD remained firm against its major counterparts which underpinned USD/JPY’s reclaim of 104.00 and bolstered USD/CNH to a record high, in conjunction with the Peoples Bank of China weakening the fix by the most since August. EUR/USD extended on post-ECB losses which saw the pair briefly break below 1.0900 and print a 7-month low, while commodity-linked currencies failed to recover from yesterday’s energy-related pressure.
Oil prices extended its pull back from recent gains amid a firmer USD and comments from Rosneft that Russia could increase output which WTI kept firmly below USD 51.00/bbl. Gold (-0.4%) prices declined alongside broad commodity weakness although the precious metal is still on course to post its first weekly gain in a month, while copper traded sideways amid indecisive risk tone.
World Bank increased its 2017 forecast for crude oil to USD 55.00/bbl vs. USD 53.00/bbl forecast in July, while it also sees metal prices increasing next year.
UPI/CVoter poll showed Hillary Clinton was ahead in 27 states vs. 23 states for Trump
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