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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, Head Strategist, APAC

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.

Most FX traders make the same critical mistake. Learn to avoid it here!

Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

23:50

JPY

Trade Balance (¥) (DEC)

140.2B

117.0B

-381.3B

23:50

JPY

Trade Balance Adjusted (¥) (DEC)

36.6B

84.2B

22.4B

23:50

JPY

Exports (YoY) (DEC)

-8.0%

-7.0%

-3.3%

23:50

JPY

Imports (YoY) (DEC)

-18.0%

-16.4%

-10.2%

00:30

AUD

NAB Business Conditions (DEC)

7

-

10

00:30

AUD

NAB Business Confidence (DEC)

3

-

5

05:00

JPY

Leading Index CI (NOV F)

103.5

-

103.9

05:00

JPY

Coincident Index (NOV F)

111.9

-

111.6

European Session

GMT

CCY

EVENT

EXP

PREV

IMPACT

08:00

CHF

Total Sight Deposits (JAN 22)

-

471.3B

Low

08:00

CHF

Domestic Sight Deposits (JAN 22)

-

403.8B

Low

09:00

EUR

German IFO Business Climate (JAN)

108.4

108.7

Medium

09:00

EUR

German IFO Current Assessment (JAN)

112.6

112.8

Medium

09:00

EUR

German IFO Expectations (JAN)

104.1

104.7

Medium

11:00

GBP

CBI Trends Total Orders (JAN)

-10

-7

Low

11:00

GBP

CBI Trends Selling Prices (JAN)

-

-2

Low

11:00

GBP

CBI Business Optimism (JAN)

-

-12

Low

18:00

EUR

ECB’s Draghi Speaks in Frankfurt

-

-

High

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EUR/USD

1.0645

1.0733

1.0764

1.0821

1.0852

1.0909

1.0997

GBP/USD

1.3962

1.4120

1.4192

1.4278

1.4350

1.4436

1.4594

--- 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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