Draghi wreaks havoc in the market; Euro plummets
09/May/2014 • Currency Updates•
Major movements in currency markets came yesterday from across the channel, with the euro seeing most volatility. The pound eventually ended up against the single currency, having touched 3 month highs. Sterling to dollar trading was flat over the session.
The Bank of England held rates steady at a predictable 0.5%, with bond buying sticking firm at £375bn. We won’t know until the 21st the finer details of the meeting, which may show some dissent within the MPC’s ranks. More information on the Bank’s medium term forecasts will be released next week in the quarterly inflation report.
Today should provide more pound led volatility, as we have industrial and manufacturing productions, with a GDP estimate and a goods trade balance.
Draghi certainly lived up to his recent reputation as a market mover yesterday, sending the single currency swinging all over the park. After much volatility it ended down on both the pound and the dollar by about 0.5%.
Having held firm at 0.25% this month, Draghi took investors for a ride during his hour long press conference. After a bullish initial discussion on Eurozone inflation sent the Euro powering upwards, the Governor sent it plummeting downwards over a cent by admitting that the European Central Bank would be ‘comfortable’ with decreasing interest rates in the June meeting. It seems that he has finally admitted defeat and recognised that inflation cannot be boosted by his words alone.
Elsewhere, Greek unemployment showed a slight decline to 26.5%. Data out today is more varied, with German imports and exports, French budget statements, Italian industrial output, Greek inflation and Portuguese inflation.
The dollar was subject to the volatility caused by action in the Eurozone yesterday rather than any US led movement. After a mid-session dip, the greenback powered up against the euro and ended around 0.8% up. The dollar also saw a slight drop off against the pound.
Yellen’s second day of testimony was pretty much a re-run of yesterday, again reiterating the soft monetary policy stance until the current economic situation improves.
More positive employment data from the US yesterday, with initial and continuing jobless claims falling to 319k and 2.685m respectively. This follows on from last week’s strong NFP figures and adds weight to the argument that, while US GDP might have suffered over the winter, the labour market certainly hasn’t.
No data of note from the US today.