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Markets Yearn for Dovish ECB, SNB After RBA Disappoints

Markets Yearn for Dovish ECB, SNB After RBA Disappoints

Ilya Spivak,

Talking Points:

  • Commodity Dollars drop, Yen and Euro rise as RBA triggers risk aversion
  • Dovish commentary from ECB and SNB officials may help uplift sentiment
  • Upbeat UK PMI, hawkish Fed-speak threaten cut short any risk recovery

The Australian, Canadian and New Zealand Dollars underperformed while the anti-risk Euro and Japanese Yen traded higher as sentiment soured in overnight trade. Investors’ mood darkened after the RBA delivered a status-quo monetary policy statement, as expected. The neutral posture undermined hopes for a further expansion of global stimulus efforts following last week’s top-up from the BOJ.

The post-RBA response underscores sentiment’s ability to trump macroeconomic fundamentals in the current environment. While the Aussie Dollar initially rallied as rate cut chances ebbed, the move was swiftly dwarfed by risk-off momentum. Traders’ loud cheering for the BOJ’s very modest boost to policy support and stubborn commitment to a dovish Fed outlook are other symptoms of the same phenomenon.

Looking ahead, comments from ECB policymaker Benoit Coeure and SNB President Thomas Jordan will maintain the focus on monetary policy trends. Mr. Coeure’s remarks will be scrutinized for clues about a possible expansion of ECB QE next month. Those of Mr. Jordan may help inform bets on the Swiss monetary authority’s appetite for matching the efforts of its Eurozone counterpart as it struggles to ward off imported disinflation.

Sentiment may find a modicum of renewed support if the two officials’ comments buoy hopes for additional accommodation in the pipeline. The durability of a recovery in risk appetite may prove lacking however if UK Construction PMI figures follow yesterday’s manufacturing report to surprise on the upside, fueling fears that the BOE may yet raise rates this year. Comments from Kansas City Fed President Esther George may compound risk-off pressure if the vocally hawkish voter on this year’s FOMC talks up the case for further tightening.

Are markets behaving as DailyFX analysts expected? See our First-Quarter Forecasts and find out!

Asia Session

22:30AUDWeekly Consumer Confidence (JAN 31)111.2-112.2
23:50JPYMonetary Base (YoY) (JAN)28.9%-29.5%
23:50JPYMonetary Base End of period (¥) (JAN)358.8t-356.1t
00:00NZDANZ Commodity Price (JAN)-2.3%--1.8%
03:30AUDRBA Cash Rate Target2.00%2.00%2.00%

European Session

08:15CHFRetail Sales Real (YoY) (DEC)--2.1%Low
08:15EURECB’s Coeure Speaks in Frankfurt--Medium
08:55EURGerman Unemployment Change (000’s) (JAN)-8k-14kLow
08:55EURGerman Unemployment Claims Rate SA (JAN)6.30%6.3%Low
09:30GBPMarkit/CIPS UK Construction PMI (JAN)57.557.8Medium
10:00CHFSNB’s Jordan Speaks in Geneva--Medium
10:00EUREurozone PPI (MoM) (DEC)-0.6%-0.2%Medium
10:00EUREurozone PPI (YoY) (DEC)-2.8%-3.2%Medium
10:00EUREurozone Unemployment Rate (DEC)10.5%10.5%Low

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3

--- Written by Ilya Spivak, Currency Strategist for

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