Euro and US Dollar Focused on Comments from ECB, Fed Officials

Talking Points:

• Euro may fall as ECB’s Draghi takes cautious QE stance after German election
• US Dollar may rise if broadly confident Fed comments boost rate hike prospects
• Pound shrugs off UK credit downgrade, NZ Dollar swoons on election outcome

A dull offering of economic data is likely to see central bank commentary driving G10 FX price action in the day ahead. First, investors will size up a speech from Mario Draghi as they prepare for a late-October announcement on the fate of the ECB’s QE effort. Political uncertainly in Germany may undermine the case for near-term stimulus withdrawal and clues to that effect may hurt the Euro.

Fed-speak comes into the spotlight later in the day by of comments from New York, Chicago and Minneapolis branch presidents Dudley, Evans and Kashkari. The priced-in probability of a third rate in 2017 is 63.2 percent after last week’s hawkish FOMC outing. That leaves plenty of room for greater certitude to be factored into the equation and drive the US Dollar higher if policymakers project a broadly confident demeanor.

The New Zealand Dollar underperformed in Asia Pacific trade after a much-anticipated general election resulted in an uncertain outcome. The Yen also fell as Japanese stocks rose, sapping demand for the anti-risk currency. The British Pound retraced broadly higher, recovering some of the lost ground lost after the UK sovereign credit rating was downgraded at Moody’s.

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Asia Session

European Session

** All times listed in GMT. See the full DailyFX economic calendar here.

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

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