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Talking Points:

  • Euro may fall as ECB’s Draghi cools QE cutback speculation
  • US Dollar sinks lower on White House officials’ commentary
  • NZ Dollar erases over half of drop triggered by soft CPI data

All eyes are on the ECB monetary policy announcement in European trading hours. Markets seem primed for an upbeat shift in official rhetoric to set the stage for the speedier unwinding of QE asset purchases to be announced in March.

The hawkish tone on display in minutes from December’s meeting of the ECB Governing Council is a potent argument in Euro bulls’ favor. President Draghi has tended pull the other way however, arguing that even the expiry of the current QE program in September is more of a place-holder than a strict end point.

The single currency may rise if Mr Draghi’s comments at the press conference following the policy announcement reinforce the hawks’ position, though gains may be limited considering the impressive rally already achieved in recent weeks. On the other hand, a dovish stance may trigger a dramatic drop.

The US Dollar sank lower in Asia Pacific trade as comments from White House officials amplified existing selling pressure. Capital has fled the greenback onbets that rosy global growth willsee more central banks follow the Fed’s hawkish lead, making USD alternatives seem relatively cheap (and thereby attractive).

Appropriately enough, the Australian and New Zealand Dollars – the highest-yielding currencies in the G10 FX space – led the way higher against their US counterpart. The latter currency erased more than half of its losses following disappointing CPI data earlier in the day.

See our free guide to learn how you can use economic news in your FX trading strategy!

Asia Session

Euro May Fall as ECB President Draghi Cools QE Cutback Bets

European Session

Euro May Fall as ECB President Draghi Cools QE Cutback Bets

** 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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