Euro Looks to Draghi Testimony to Feed Stimulus Expansion Speculation

Talking Points:

• Euro Looks to Draghi Testimony for Clues About Stimulus Expansion
• NZ Dollar Narrowly Higher on Firming RBNZ Bets in Overnight Trade
• What Will Drive Forex Markets in the Days? See Our Weekly Outlook

Testimony from ECB President Draghi is in focus in European trading hours. Traders will be most keen to learn any details about the central bank’s work on an ABS asset purchase program. Policymakers promised to step up work on such an effort in June. The markets will be looking to gauge whether the ECB has already decided to implement ABS asset purchases – meaning stimulus expansion is in train – or if the scheme is intended to sit in the central’s toolbox for now. Dovish rhetoric hinting at the former is likely to weigh on the Euro, and vice versa. We are short EUR/USD.

The New Zealand Dollar narrowly outperformed in otherwise quiet overnight trade, rising as much as 0.15 percent on average against its leading counterparts. The move higher paced an increase in New Zealand’s benchmark 10-year bond yield, hinting firming RBNZ policy bets were behind the advance. Marginal improvements on June’s REINZ housing data set and an uptick on the Performance of Services Index may have been the culprits behind price action.

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--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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