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Euro May Fall as Aussie Dollar Gains on Dovish Draghi Comments

Euro May Fall as Aussie Dollar Gains on Dovish Draghi Comments

Ilya Spivak,

Talking Points:

  • Aussie, NZ Dollars may extend rebound as Euro falls on dovish Draghi commentary
  • Pound gains as BOE’s Carney hints 2016 rate hike still on tap, Loonie retraces gains
  • What currencies are FXCM traders buying and selling? Find out with DailyFX SSI

The Australian and New Zealand Dollars outperformed in overnight trade as stocks pushed higher, offering support to the sentiment-linked currencies. The British Pound likewise strengthened following hawkish comments from BOE Governor Mark Carney in an interview with the Wall Street Journal published Friday. The central bank chief said he does not expect the outlook for economic growth to be materially changed by recent market turmoil, hinting that a 2016 rate hike may yet materialize.

The Canadian Dollar diverged from its commodity bloc counterparts, with prices correcting lower after last week’s aggressive recovery on the back of a hawkish BOC policy announcement and rebounding crude oil prices. The Euro adopted a similar tone, retracing gently higher having slumped to a three-week low after ECB President Mario Draghi suggested that the central bank may expand monetary stimulus as soon March.

Looking ahead, another scheduled speech from Mr Draghi is likely to dominate the spotlight. Traders will look for any clues to suggest if the ECB is prepared to expand the amount of easing it is offering in the near term by increasing the size of current QE asset purchases. This would contrast with December’s policy update that extended the existing easing effort but did not deliver more immediate accommodation.

Comments suggesting a more forceful approach is on tap are likely to weigh on the Euro while bolstering risk appetite. This may help fuel further gains in the Aussie and Kiwi while undermining funding currencies like the Japanese Yen. S&P 500 futures are pointing higher in late Asian trade, reinforcing the case for a risk-on scenario.

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Asia Session

GMTCCYEVENTACTEXPPREV
23:50JPYTrade Balance (¥) (DEC)140.2B117.0B-381.3B
23:50JPYTrade Balance Adjusted (¥) (DEC)36.6B84.2B22.4B
23:50JPYExports (YoY) (DEC)-8.0%-7.0%-3.3%
23:50JPYImports (YoY) (DEC)-18.0%-16.4%-10.2%
00:30AUDNAB Business Conditions (DEC)7-10
00:30AUDNAB Business Confidence (DEC)3-5
05:00JPYLeading Index CI (NOV F)103.5-103.9
05:00JPYCoincident Index (NOV F)111.9-111.6

European Session

GMTCCYEVENTEXPPREVIMPACT
08:00CHFTotal Sight Deposits (JAN 22)-471.3BLow
08:00CHFDomestic Sight Deposits (JAN 22)-403.8BLow
09:00EURGerman IFO Business Climate (JAN)108.4108.7Medium
09:00EURGerman IFO Current Assessment (JAN)112.6112.8Medium
09:00EURGerman IFO Expectations (JAN)104.1104.7Medium
11:00GBPCBI Trends Total Orders (JAN)-10-7Low
11:00GBPCBI Trends Selling Prices (JAN)--2Low
11:00GBPCBI Business Optimism (JAN)--12Low
18:00EURECB’s Draghi Speaks in Frankfurt--High

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3
EUR/USD1.06451.07331.07641.08211.08521.09091.0997
GBP/USD1.39621.41201.41921.42781.43501.44361.4594

--- 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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