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Draghi Signals Fresh Easing Sending Euro Lower

Jun 18 2019, 06:10 PM (+06) |

Dollar Higher

The US dollar has traded higher again today, marking its fifth consecutive winning day so far as the Index breaks back above the 97.10 level. Continued declines in other G10 currencies are keeping the greenback well bid, despite dovish expectations for the FOMC meeting later this week.

Draghi Signals Fresh Easing

EURUSD remains under pressure so far today with price continuing the slide below the 1.1217 level. Dovish comments today from ECB chairman Draghi have kept the pair well offered. Draghi confirmed expectations of further stimulus saying:

“In the absence of improvement, such that the sustained return of inflation to our aim is threatened, additional stimulus will be required,”.

On the data front, the final May eurozone CPI print saw the month on month figure printing lower than expected at 0.1% vs 0.2% expected.

GBP Going Lower

GBPUSD has traded lower this morning also as political turmoil in the UK looks no closer to be cleared up. The outlook for Brexit remains as uncertain as ever and consequently, traders are not expecting a constructive tone from the BOE later this week. GBPUSD trades 1.2524 last as price nears the next support at 1.2484.

Risk Assets Firmer

Risk assets have improved today as the market shrugs off earlier jitters in response to news that the US is deploying a further 1000 troops to the Middle East. Tensions between the US and Iran have increased once again following alleged Iranian attacks on Saudi oil tankers and the potential for conflict between the two countries has ratcheted up a level. However, for now, it seems the market remains focused on the prospect of further Fed and ECB easing with SPX500 trading 2899.53 last, as it continues to recover above the 2877.30 level.

Gold & JPY Up

Safe havens have both been higher today despite USD strength and higher equities price, reflecting a short term dislocation in the relationship between these instruments. Both JPY and gold have traded higher against USD. USDJPY has turned lower once again, rejected by the 108.75 level yesterday, though still up off the recent mid 107 lows. XAUUSD is pushing higher against the 1346.97 level once again as gold prices remain buoyed by Fed easing expectations.

Oil Shrugs Off Middle East Tensions

Oil prices have remained curiously weak, despite the rising tensions in the Middle East which usually support price. Crude trades 51.81 last, still holding above the 51.50 level for now, though threatening a break. The market is keenly waiting on the next EIA report due tomorrow following last week’s reporting of fresh record highs in US crude production which continues to keep oil offered.

Commodity Currencies Can’t Catch A Break

Weaker oil prices and a stronger US dollar have kept the rally alive in USDCAD today. The pair continues its recovery march back towards the 1.3469 level which has been a key pivot this year. While CAD is being weighed on by trade war concerns and lower oil prices, there is the potential for a reversal later in the week given the dovish expectations for the FOMC.

AUDUSD has ploughed down to fresh lower levels today, trading .6844 last as the slide below the .6862 level continues, putting focus on a test of the .6762 level next. Trade war concerns, fresh easing from the RBA and a stronger US dollar are keeping AUD weighted currently.

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