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Euro Looks to Draghi Press Conference for Stimulus Expansion Clues

Euro Looks to Draghi Press Conference for Stimulus Expansion Clues

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • Euro Looks to ECB President Draghi’s Presser for Stimulus Expansion Clues
  • Bank of England Rate Decision Likely to be a Non-Event for the British Pound
  • Australian Dollar Fell After Soft Jobs Data Undermined RBA Rate Hike Bets

A monetary policy announcement from the European Central Bank headlines the calendar in European hours. The addition of anything new into the policy mix seems unlikely after the central bank introduced a slew of additional measures to boost lending and fight disinflation at its June’s meeting. Officials will likely want to monitor how those are working out before expanding stimulus further.

With that in mind, the spotlight will be on ECBPresident Mario Draghi’spress conference following the policy announcement, with investors combing commentary for clues about where officials intend to steer going forward. The fate of the forthcoming ABS purchase program stands out in particular. The ECB pledged to “intensify preparatory work” on the plan and investors will want to see if that means the central bank has already settled on implementing it.

If traders interpret Draghi’s remarks to mean the ECB has already resolved to activate the ABS scheme once it is ready, that would imply an expansion of stimulus is in train. Needless to say, such an outcome is likely to bode ill for the Euro. Alternatively, rhetoric suggesting the plan may follow the OMT program to languish in the ECB’s arsenal without ever seeing action could offer a lift to the single currency. We remain short EURUSD.

The Bank of England is likewise due to deliver its rate decision.Governor Mark Carney and company are widely expected to keep things unchanged yet again. This typically means that a statement illuminating the MPC’s thought process will not be released. That will leave traders to wait for the release of the quarterly Inflation Report next week to get a read on where policy is headed, making today’s announcement a likely non-event for the British Pound. We are waiting for a GBPUSD selling opportunity.

The Australian Dollar underperformed in overnight trade following a disappointing set of Employment figures. The economy unexpectedly lost 300 jobs in July, missing estimates calling for a 13,200 increase. The jobless rate surged to 6.4 percent, marking the highest level in 12 years and disappointing expectations calling for a print at 6.0 percent. The Aussie’s slide tracked a drop in Australia’s 2-year bond yield, suggesting the soft data set undermined RBA interest rate hike expectations.

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Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

23:30

AUD

AiG Performance of Construction Index (JUL)

52.6

-

51.8

23:50

JPY

Official Reserve Assets ($) (JUL)

1276.0B

-

1283.9B

0:00

NZD

QV House Prices (YoY) (JUL)

7.6%

-

8.0%

1:30

AUD

Employment Change (JUL)

-0.3K

13.2K

14.9K

1:30

AUD

Unemployment Rate (JUL)

6.4%

6.0%

6.0%

1:30

AUD

Participation Rate (JUL)

64.8%

64.7%

64.7%

1:30

AUD

Full Time Employment Change (JUL)

14500

-

-3.9K

1:30

AUD

Part Time Employment Change (JUL)

-14.8K

-

18.8K

2:00

JPY

Tokyo Avg Office Vacancies (%) (JUL)

6.20

-

6.45

European Session

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

5:45

CHF

SECO Consumer Confidence (JUL)

-1 (A)

1

Low

6:00

EUR

German Industrial Production (MoM) (JUN)

0.3% (A)

-1.7%

Medium

6:00

EUR

German Industrial Production (YoY) (JUN)

-0.5% (A)

1.1%

Medium

7:00

CHF

Foreign Currency Reserves (JUL)

-

449.6B

Low

11:00

GBP

Bank of England Rate Decision

0.50%

0.50%

High

11:00

GBP

BOE Asset Purchase Target

375B

375B

High

11:45

EUR

European Central Bank Rate Decision

0.15%

0.15%

High

11:45

EUR

ECB Marginal Lending Facility

0.40%

0.40%

High

11:45

EUR

ECB Deposit Facility Rate

-0.10%

-0.10%

High

12:30

EUR

ECB’s Draghi Holds Press Conference

-

-

High

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EURUSD

1.3260

1.3314

1.3348

1.3368

1.3402

1.3422

1.3476

GBPUSD

1.6722

1.6788

1.6821

1.6854

1.6887

1.6920

1.6986

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

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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