US AM Digest: Euro Rebounds as Draghi Downplays Recent Soft Data
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EUR: ECB kept its main rates on hold as expected, while the comments alongside the decision had been left unchanged. As such, a minimal reaction had been seen in the Euro. EURUSD reclaimed the 1.22 handle after Draghi noted that slight moderation in economic data may reflect temporary factors, while the ECB still sees solid growth. EURUSD briefly made fresh 2018 lows at 1.2143, however this was somewhat short-lived given Draghi’s upbeat assessment that growth remains on track despite recent soft data.
USD: The US Dollar has been on the backfoot today amid the pullback in US yields with the 10yr dipping back below 3%, subsequently providing a much-needed lift for its major counterparts. Much of the USD selling has been seen through GBPUSD which made a mild test of the 1.40 handle, ahead of tomorrow’s GDP report.
SEK: The Swedish Krona is the notable laggard today following the Riksbank rate decision in which the central bank pushed back its rate hike path trajectory by noting that a rate rise is seen at the end of the year as opposed to H2 18 previously. The Riksbank also downgraded its growth forecast while upgrading their inflation forecast with the latter seen as a by-product of the recent rise in oil prices, alongside the significant decline in the SEK.
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IG Client Sentiment Index Chart of the Day: EURUSD
EURUSD: Retail trader data shows 52.0% of traders are net-long with the ratio of traders long to short at 1.08 to 1. The number of traders net-long is 11.0% higher than yesterday and 56.0% higher from last week, while the number of traders net-short is 0.5% lower than yesterday and 15.6% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EURUSD prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger EURUSD-bearish contrarian trading bias.
Learn more about the IG Client Sentiment Index on the DailyFX Sentiment page
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--- Written by Justin McQueen, Market Analyst
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.