The ECB kept rates on hold, with the Euro briefly making a new two-year low on the release of the statement, before profit takers and option protection of 1.1100 arrived to provide support. Mario Draghi then provided a rather contradictory press conference by not being quite as dovish as expected in his outlook, stating that the Governing Council did not even discuss a cut, while at the same time suggesting that risk “remains tilted to the downside, reflecting the ongoing weakness in international trade in an environment of prolonged global uncertainties”. Traders seemed confused and EurUsd spiked higher but at the end of the sessio the pair is pretty much where it was this time yesterday.
Elsewhere the US$ is firm, following some more strong US data, which also lifted US bond yields, while stocks are lower as traders come to terms with the fact that the Fed will not be cutting rates by 50bp at next week’s FOMC meeting, and will most likely be less dovish than had previously been hoped.
Cable had any upside momentum snuffed out after a phone call between EU President, J-C Juncker and UK PM Boris Johnson, in which Juncker reiterated that the EU will not be prepared to renegotiate the withdrawal agreement ahead of the Oct 31 exit date. Both the Aud and the Nzd were also lower as traders cut positions in risk associated assets because of the rather gloomy outlook from various central banks.
WTI was choppy but ended flat on the day, torn between global growth/demand worries and threats to supplies from falling US crude stockpiles and Iranian shipping interference. The metals dropped by approximately 1% due to the strength of the dollar.
In terms of data, the German IFO Business Climate dropped to 95.7 in July, down from 97.5 and missed expectation of 97.0. The Expectations Index dropped to 92.2, down from 94.0, missing expectation of 94.0 while the Current Assessment Index dropped to 99.4, down from 101.1, missing expectation of 100.4. From the US, the June Durable Goods orders rose 2.0% to US$ 246.0 bio in June, beating the expectation of 0.7%. Ex-transport orders rose 1.2%, also beating expectation of 0.2%. Excluding defense, new orders increased 3.1%. The weekly jobless claims came in at 206K, against the expectation of 219K, highlighting the upbeat employment situation in the US, and suggesting that the Fed may not be as dovish as previously thought likely at next week’s meeting.
Looking ahead, Friday will be pretty much an empty calendar until we get the Q2 Preliminary US GDP (exp 1.8% annualised) and US Personal Consumption/Expenditure, both due late in the day (exp; Prices: 0.6%, Expenditure : 2.0%). Ahead of that, the Tokyo July CPI is due (exp 1.1%yy, Ex F/E; 0.8%yy) but that is about it today. Have a good weekend.
Economic data highlights will include:
Fri: Tokyo CPI, US GDP, US Personal Consumption/Expenditure
Market moves, in brief:
FX: DXY 97.79 (+0.11%)
Bonds: US10Y; 2.085% (+1.72%), German 10Y; -0.362% (+4.31%), UK 10Y; +0.698% (+3.10%), Australian 10Y; 1.241% (-5.16%), NZ 10Y; 1.54% (-1.60 %), China 10Y; 3.178% (+0.69%)
Stock Indices: DJI; -0.47%, S+P; -0.53%, NASDAQ; -1.00%, EUStoxx50; -0.65%, FTSE100; -0.17%, Shanghai Composite; +0.48%,
Metals: Gold $1414 oz (-0.8%), Silver $16.41 oz (-1.12%), Copper $2.7031 lb (-0.31%), Iron Ore $120.00 per tonne (NYMEX) (-0.8%),
Oil: WTI $55.90 pb (+0.09%)
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